FTSE 100: Banks slide but Morrisons jumps on upgrade

Banking shares were under pressure, led lower by German lender Deutsche Bank, after it said it had no intention of paying $14bn to settle civil claims regarding its handling of mortgage-backed securities that contributed to the 2008 financial crisis.

Royal Bank of Scotland was under the cosh amid the possibility it could also face a fine from the US authorities for mis-selling mortgage bonds in the run up to the banking crisis.

Neil Wilson, markets analyst at ETX Capital, said: “RBS could have to pay up to $13bn to settle the claims. Even a third of this figure which deliver a crippling blow to the lender, making its return to profitability even further off. It would also derail plans to return the bank to private ownership any time soon.

“After its latest loss, RBS has notched up £50bn in losses since the financial crisis – more than the £45bn stumped up by taxpayers to save the bank.”

StanChart was also in the red, though there were reports it may spin out its private equity unit to its managers as part of a broader move to reduce the risk profile of its business.

Faced with stricter capital rules and losses the lender may exit Standard Chartered Private Equity, Bloomberg reported.

Among the $5bn in assets managed by SCPE were a stake in Union Bank of Nigeria and a Singaporean maker of spicy noodles, Crystal Jade Culinary Concepts Holding Pte.

SCPE is housed within StanChart´s principal finance unit, which posted a $167m loss in the first six months of 2016, following $105m of losses in the backhalf of 2015.

South African private healthcare company Mediclinic was in the red following a report it was preparing a bid for the remainder of peer Spire Healthcare.

Betaville cited people familiar with the matter as saying that Mediclinic was working with Morgan Stanley and could be weeks away from submitting a formal approach for Spire Healthcare, in which it currently owns a 29.9% stake.

The offer was seen to be at a 30% premium to Spire Healthcare’s current share price.

On the upside, Wm Morrison was higher on the back of further broker upgrades, including Exane BNP Paribas, which upgraded the stock to ‘neutral’ from ‘underperform’ and lifted the target price to 200p from 165p following the supermarket retailer’s first-half results on Thursday.

“We have a positive stance on the UK food retailers but thought that Morrisons would need to reinvest nearly its entire cost savings. We are no longer convinced that’s the case,” said the bank.

It said Morrisons is a business burdened by paperwork, which damages the shopping experience and adds costs and complexity. However, Exane reckons the relatively new management team can continue to lift the burden, improve the retail, stay sharp on price and deliver some margin accretion.

FTSE 100 - Risers

Morrison (Wm) Supermarkets (MRW) 214.10p 2.88%
TUI AG Reg Shs (DI) (TUI) 1,055.00p 2.73%
AstraZeneca (AZN) 5,124.00p 2.60%
Burberry Group (BRBY) 1,293.00p 2.54%
Shire Plc (SHP) 5,040.00p 2.11%
Provident Financial (PFG) 2,959.00p 1.68%
Sky (SKY) 841.50p 1.02%
CRH (CRH) 2,539.00p 0.95%
Hammerson (HMSO) 568.00p 0.80%
Informa (INF) 733.00p 0.76%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 185.00p -4.74%
Standard Chartered (STAN) 608.90p -2.45%
ITV (ITV) 193.60p -2.37%
Fresnillo (FRES) 1,607.00p -2.37%
Barclays (BARC) 165.50p -2.36%
Coca-Cola HBC AG (CDI) (CCH) 1,690.00p -2.14%
BAE Systems (BA.) 537.00p -2.10%
BHP Billiton (BLT) 988.30p -1.37%
Mediclinic International (MDC) 929.00p -1.33%
Persimmon (PSN) 1,750.00p -1.24%