Belfast Telegraph

Banking stocks hit amid legal action against Barclays in US and Italian bailout

Blue-chip banking stocks took a hit as the London market closed for Christmas after US authorities launched legal action against Barclays and the Italian government agreed a bailout for Monte dei Paschi di Siena.

The FTSE 100 Index closed up 4.49 points to 7,068.17, with Barclays dropping close to 1% after the US Department of Justice (DoJ) filed a civil complaint in New York over the British bank's sale of toxic mortgage-backed securities in the lead-up to the financial crisis.

The DoJ has accused Barclays and employees of misrepresenting the quality of loans they sold to tens of thousands of investors between 2005 and 2007 in the run-up to the country's financial meltdown.

Shares in Barclays were down 2.1p to 224.9p, while wider banking stocks also suffered a blow, with HSBC and Standard Chartered off 8.7p to 646.5p and 2.2p to 661.6p respectively.

However, Royal Bank of Scotland, which is also under investigation in the US over the alleged mis-selling of mortgage-backed securities, rose 3.1p to 231.1p after Barclays vowed to "vigorously defend the complaint and seek its dismissal at the earliest opportunity".

Separately, German lender Deutsche Bank has agreed to pay 7.2 billion US dollars (£5.8 billion) as part of the DoJ's investigation into the sale of mortgage-backed securities. The figure is considerably lower than the 14 billion US dollars (£11.3 billion) originally sought.

Credit Suisse has reached a 5.28 billion US dollar (£4.2 billion) settlement.

The announcements came as the Italian government stepped in on Friday to rescue Monte dei Paschi di Siena, after Italy's third-largest lender failed to raise the 5 billion euros (£4.2 billion) it needed to stay afloat.

Across Europe, Germany's Dax was down 0.3% and the Cac 40 in France was flat.

On the currency markets, the pound was struggling against the US dollar and the euro after a slew of economic data gave a mixed picture of the UK economy.

The bright spot came from the Office for National Statistics' (ONS) upward revision to third quarter gross domestic product to 0.6% from 0.5%.

However, Britain's current account deficit - measuring the amount of money flowing in and out of the economy - made for more dismal reading, expanding to £25.5 billion in the third quarter, up from a revised deficit of £22.1 billion for the quarter before.

Sterling was 0.2% lower against the greenback at 1.225 and down 0.4% versus the euro at 1.172.

The oil price slipped back below the 55 US dollar a barrel mark as rising Libyan output threatened supply cuts agreed by the Opec cartel.

Brent crude sunk 1.3% - or 73 cents - to 54.32 US dollars per barrel.

In UK stocks, the FTSE 250 payments firm Paypoint raced ahead after agreeing a £26.5 million cash deal to sell its loss-making mobile payments business to Volkswagen Financial Services.

Shares were up 2%, or 19p, to 965p.

The biggest risers on the FTSE 100 Index were Capita up 18.5p to 520.5p, Land Securities up 21p to 1,070p, National Grid up 17.8p to 951.3p, and Hammerson up 9p to 569p.

The biggest fallers on the FTSE 100 Index were Barratt Developments down 6.7p to 469.3p, HSBC down 8.7p to 646.5p, Fresnillo down 12p to 1,112p, and BHP Billiton down 13p to 1,257.5p.