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View the article online at http://citywire.co.uk/wealth-manager/article/a557839

RBS and Lloyds climb higher as FTSE nears 5,700

by Max Julius on Jan 13, 2012 at 09:27

RBS and Lloyds climb higher as FTSE nears 5,700

Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L) extended their recent gains on Friday, with investors sending RBS shares to a two-month peak, while the FTSE 100 advanced ahead of an Italian debt auction.

RBS took on 1.7p, or 7.3%, to 24.7p – its highest level since the end of October – following a 5.5% gain on Thursday after the state-backed lender unveiled cuts to its investment banking division.

Citywire Top Stocks Lloyds and Barclays (BARC.L) shares added 0.8p to 29.9p and 7p to 200p respectively.

Friday’s gains came as broker Seymour Pierce upgraded its recommendation for RBS to ‘buy’ from ‘reduce’, lauding the bank’s new plans.

‘We believe that management has finally “grasped the nettle”, and though not guaranteed to generate rewards for shareholders, we believe there is now greater potential for gains,’ said Bruce Packard, analyst at the broker. ‘RBS remains risky, but at least now shareholders could be rewarded for the risk.’

Italy’s borrowing costs fall

Meanwhile, the UK index of blue-chip shares hardened 0.52%, or 30 points, to 5,693 and the All Share index improved 0.47%, or 14 points, to 2,925. See the FTSE’s performance and the index’s top winners and losers.

Italy, now at the centre of the eurozone debt crisis, is set to sell €4.75 billion of three-, four- and six-year government bonds, following well-received Italian and Spanish auctions in the previous session.

It is speculated that the success of those debt sales may have been due to a flood of cheap three-year loans the European Central Bank handed out last year, according to Michael Hewson at CMC Markets.

But he added: ‘It remains to be seen whether banks and investors will be prepared to do that with longer term paper and that really remains the acid test, as to whether these lower borrowing costs are sustainable.’

Nonetheless, the borrowing costs of Italy, Spain and France – the eurozone’s three biggest economies after Germany – all dropped further of the auctions, with those of Italy nearing a one-month low.

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