Barclays biggest victim as banks sell-off rumbles on

Shareholders of the major banks were left to count the cost of the latest sell-off. Those banks already contained with the Government's "golden circle" struggled to make headway. Royal Bank of Scotland edged 0.6p higher to 10.9p on turnover of 225 million but the enlarged Lloyds Banking Group shed a further 3p to a record low of 41.8p as a total of eight million shares changed hands. Investors remain worried by the growing prospect of full nationalisation for both companies.

Citigroup continues to rate RBS a buy but has cut its target from 100p to 35p following the sharp fall in the price. It says nationalisation remains a possibility, and RBS will continue to be a volatile investment. The market has lost confidence that the bank has sufficient capital.

Barclays was the biggest casualty on the day, losing 12.4p to 60.5p on turnover of almost 200 million shares, despite its assertion that it remains in rude financial health. The City is less convinced and is worried about further big write-offs and the possibility of it turning to the Government for extra funding — making it another bank on the fast track to nationalisation.

HSBC put on 23p at 508p, but traders say it still has a £20 billion shortfall on its balance sheet. Standard Chartered, which recently completed a round of funding, rallied 50½p to 740p.

Some traders said part of the blame for the latest sell-off lay with the Government's decision to lift the ban on short-selling. But that will have played only a small part. Most institutional income funds will have dumped the banking sector because of its uncertain outlook and absence of dividends.

Sandy Chen, banking analyst at Panmure Gordon, says the low share prices of UK banks make further significant dilution for current shareholders likely, as bankruptcies, unemployment and forced asset sales increase.

Shares in general were heading lower again today on the London stock market, stretching its losing streak to nine out of the past 10 trading sessions.

Set against the gloomy backdrop of a worldwide economic slump, a banking system in meltdown and talk that sterling may eventually reach parity with the dollar, investors are in no mood to stick their heads above the parapet.

"It has been a dreadful start to 2009, and it is difficult to see any scope for improvement short term," said one disgruntled trader.

Only yesterday Jim Rogers, co-founder of Quantum Fund, along with billionaire George Soros, gave a pretty downbeat assessment of prospects for the UK economy, saying: "I would urge you to sell any sterling you might have."

He, along with other City forecasters, is worried the Government's latest measures to get banks lending money will send debt levels soaring to unsustainable levels, and in turn create further weakness in the pound.

The FTSE 100 index briefly flirted with the 4000 level before reducing the deficit to 38.2 points at 4053.1. Selling pressure was described as moderate. The index was further depressed by several companies going ex-dividend. These included interdealer broker Icap, which was down 11½p at 243¼p, and Imperial Tobacco, which fell back 67p to 1873p.

Shares in the London Stock Exch–ange retreated 4p to a two-and-a-half year low of 459½p on fears of increased competition, but stockbroker Hargreaves Lansdown firmed 4p to 170p after Citigroup raised its rating on the shares from hold to buy. It also jacked up its target from 165p to 190p.

AIM-listed Judges Capital put on 4½p to 64p on the back of a strong second-half performance. The scientific-instruments manufacturer said profits for the full year would be comfortably ahead of expectations. The company also reported that it has a record order book.