Barclays battered by news of major shareholder selling warrants while Royal Bank hit by libor fine concerns
As investors continued to fret about the EU's inability so far to resolve Greece's financial crisis and the US fiscal cliff, banking shares were among the leading fallers.
Barclays closed down 13.7p at 240.5p as one of its leading shareholders, Qatar's sovereign wealth fund, sold the last of the warrants it received as part of a controversial fundraising in 2008. Qatar still holds 6.7% of Barclays, but has made a profit of around £1.7bn from selling warrants in 2009 and now. As part of the deal, Deutsche Bank and Goldman Sachs sold 303m Barclays shares at 244p each, putting pressure on the bank's market price.
Separatedly came reports that Barclays' investors were putting pressure on new chief executive Antony Jenkins to cut back its investment banking business. Meanwhile analysts at JP Morgan Cazenove raised their recommendation on Barclays from neutral to overweight:
We believe that a credible new strategy requires balance sheet reduction in investment banking over time, alongside further cost cuts group-wide. While this may imply lower revenue near term, we believe that both shareholders and regulators are likely to be in favor of a reduction of investment banking assets to drive higher group return on equity and lower cost of equity. Barclays has remained our preferred UK domestic bank this year, but despite the recent rally, the shares still trade at discount of around 25% to the broader sector. With capital being addressed, we believe that Barclays offers the best relative risk/reward within UK banks with an upside of around 50% in a full restructuring scenario.
Elsewhere Royal Bank of Scotland fell 8.9p to 285.1p on concerns about possible libor-related fines, while Lloyds Banking Group lost 1.305p to 45.1p.
Overall the FTSE 100 fell 32.42 points to 5786.72 as the eurogroup met on Greece once more and Germany issued some disappointing confidence figures.
Defensive stocks were in favour, with British American Tobacco adding 28p to £32.52 and Imperial Tobacco rising 11p to £24.95p. British Land continued its recent gains after a positive trading update, climbing 2p to 537p as UBS raised its recommendation from neutral to buy.
Among the mid-caps Centamin was undermined by funding worries after it said it needed to make a gold shipment from Egypt shortly to meeting its working capital needs.
A growing political crisis in the country has also unsettled investors in the mining group. Centamin said it was preparing to resume exports, which had been halted after a court judgement questioning its right to operate its only mine, at Sukari.
It is now lodging an appeal against the ruling, and so has decided to resume exports. Operations at Sukari had continued since the judgement. Centamin dropped 4.1p to 60.6p.
Centamin is the second biggest faller in the FTSE 250 behind translation software group SDL, down 72.5p at 438.5p. The company warned full year profits could fall short of City expectations by as much as £4m. Analysts had been looking for around £40m profit this year.
Betfair added 7.5p to 760p despite saying it would withdraw from the Greek market until there was greater clarity on regulation. It had been expecting to make £13m of revenue and £7m of profit from the country in this financial year.
Betfair said it had not applied for a permit to operate in Greece since the value of the permit was unclear and the gambling legislation in the country was, it believed, inconsistent with European law. It added:
Furthermore the associated fiscal conditions attached to these permits, which may include the payment of taxes on historical revenues, make the market economically unattractive.
Earlier this month, Greece announced financial penalties and criminal sanctions against gaming companies that operated without a permit. Betfair said it believed there were significant issues with the legality of this move, but has decided to withdraw anyway.
Pork processor Cranswick climbed 73.5p to 812.5p after it reported a 21% rise in half year profits and said it had passed on higher pig prices to its customers. Last month the company warned pig prices were at a three year high.
Panmure Gordon analyst Damian McNeela said:
The fact that Cranswick has successfully managed to secure price increases from the retailers underpinning our 2013 forecasts should be well received, and allows us to overlook the slight miss to our first half forecasts. Cranswick reported adjusted pretax profit growth of 21% to £22.5m versus our £23.4m. Looking further ahead though, there remains uncertainty about EU-wide pork prices following the planned introduction of the EU sow stall ban on 1 January 2013. As such we believe the current valuation looks fair and we maintain our hold recommendation and 800p price target.
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