Public Deficit Widens, RBS to Raise

123jump.com Staff
18 Apr, 2008
New York City

The ONS reported that March public sector budget deficit rose to

[R]1:00PM New York, 5:00 PM London - U.K. public sector deficit widens by £3.6 billion and mortgage lending falls in March.[/R]

Market sentiment

In London trading FTSE 100 rose 1.27% or 76.1 to 6,056.50.

Of the FTSE 100 stocks 81 gained, 20 declined, and 1 was unchanged. Schroders led advancers in the index shares with a rise of 5.65%.

U.K. public sector current sector deficit widens by £3.6 billion

The Office of National Statistics reported in a report on the country’s public sector finances published on its Web site today that the public sector current budget was in deficit by £3.6 billion in March 2008, which is £2.3 billion higher that the same period a year ago.

In March public sector net borrowing topped £10.2 billion, which is £3.1 billion higher net borrowing than in March 2007.

However the net cash requirement was £4.7 billion lower than requirement in March 2007 at £12.7 billion.

RBS to launch massive right issue

The Financial Times reported today that the Royal Bank of Scotland will launch a rights issue to recapitalize its battered balance sheet. Analysts believe the bank may have to raise as much as £10 billion to bring its capital requirement to meet regulatory needs and industry competitors’ financial strength.

Media speculation suggests that RBS is considering in selling direct business unit.

With 25% of RBS shares held by overseas investors, the rights issue may trigger a demand for pound currency. According to the report, RBS will release its earnings and capital needs next week.

Mortgage lending to decline

Separately, the Financial Times also reported that the Council for Mortgage lenders warned that levels of mortgage lending might fall further in the coming months.

The CML said today gross mortgage lending grew 5% from £25 billion to £26.3 billion in March, which is 17% lower from a year ago.

The council is currently awaiting action from the Bank of England to ease the conditions in the market.

Gainers & Losers

Schroders led gainers in the FTSE 100 index shares with a rise of 5.65% followed by increases in Schroders Plc-NV of 5.62%, in Kingfisher Plc of 5.20%, in Royal Bank of Scotland of 4.92%, and Home Retail Group of 4.89%.

RBS gained on news that the company is preparing to launch an offer to raise £10 billion.

Kazakhmys led decliners in the FTSE 100 index shares with a drop of 6.40% followed by losses in Eurasian Natural of 4.48%, in Vedanta Resources of 2.17%, in Anglo America of 1.75%, and Xstrata Plc of 1.41%.

Kazakhmys and Eurasian Natural fell after Kazakhstan said it may impose a customs duty on exporters of metals and other mining industry and would decide on its size by the end of the month.

Other commodity stocks fell as well despite crude oil prices climbing above $116 per barrel. BHP Billiton fell 1.32% and Antofagasta fell 1.14%.