London’s banking stocks hit their lowest level in a decade on Tuesday as hints about state intervention triggered an exodus from the sector. Confusion about whether the UK government would offer capital injections triggered some of the heaviest falls for bank shares since the credit crisis began, as some analysts warned that the scale of government investment would lead to material dilution. RBS slumped 39% to 90p, a 15-year low. More than 485m shares changed hands through the LSE, the highest on record. RBS has fallen nearly 52% over the past three sessions on concerns about its capital. One rumour circulating Tuesday suggested the bank had sounded out shareholders about a possible £7.5bn state-backed issue of preferred stock. RBS earlier denied it had approached the government for cash. Lloyds TSB, down 13% and Barclays, off  9%, also denied asking for government help. Dealers talked of a dash for cash, with funds choosing to sell at any price rather than risk the dilution and dividend freeze that would come with recapitalisations. Meanwhile, traders reported persistent speculation that HSBC could act as buyer of last resort should RBS fail.

This entry was posted by Gwen Robinson on Wednesday, October 8th, 2008 at 5:46 and is filed under Capital markets. Tagged with barclays, hsbc, lloyds tsb, rbs. Edit this entry.