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Bank shares rally after financial 'stress tests' offer comfort

The UK's biggest banks have emerged unscathed from the European stress test result, the FTSE showed.

Banks dominated the blue-chip risers board after the UK's "big four" - Barclays, HSBC and part-nationalised Lloyds Banking Group and Royal Bank of Scotland - emerged unscathed from the European stress test result.

Barclays rose 13.7p to 315.7p, Lloyds lifted 2.5p to 66p and Ulster Bank Royal Bank of Scotland added 1.3p to 46.7p.

The stress test results helped boost confidence in the UK and the pound, with sterling hitting a three-month high against the dollar at one stage yesterday, up 0.3% to $1.55.

On the Irish Stock Exchange, First Trust parent Allied Irish Banks rose as much as 5.4% in Dublin trading to 95 cents before dropping to 93 cents. Bank of Ireland rose to just under €0.77.

The tests were held to assess the ability of the banks to withstand future financial crises.

Bernard McAlinden at NCB Stockbrokers said: "The results of the European banks' stress tests have provided some degree of comfort to equity markets."

Other risers in the top flight included FT and Penguin owner Pearson after it upgraded its outlook for 2010 on the back of better-than-expected half-year results. Figures were helped by a strong performance in educational publishing, while its FT operation saw advertising revenue grow in the first half.