Shares in Lloyds Banking Group hit their highest level in three years, raising hopes of a decision on privatisation.
Gary Greenwood, an analyst at Shore Capital, said Lloyds and Royal Bank of Scotland are set to benefit from the improving domestic economy.
“We have become relatively more positive on the outlook for the developed market-focused UK banks owing to a better outlook for Western economies and improved levels of capitalisation,” he said.
Lloyds shares closed up 0.64p at 75.41p, having hit an intra-day high of 75.9p. RBS added 1.2p at 337p.
The wider market suffered a volatile day as traders struggled with the implications of disappointing employment figures from the US. A lacklustre August number for job creation and a big downwards revision to the July figure suggested the world’s biggest economy may be struggling, but also lowered the chance of the Federal Reserve trimming its money printing programme this month. The FTSE 100 Index closed 14.89 points higher at 6,547.33.
Tullow Oil topped the blue chip risers’ board after it announced a discovery in Norway’s Arctic region. Shares were up more than 3 per cent, or 37p, at 1,070p.
A weakening dollar and combative remarks on Syria by Russian president Vladimir Putin pushed oil prices higher and helped other drillers. Among the Scottish stocks, Cairn Energy advanced 1.7p to 276.7p while oil services firm Wood Group added 4p at 796p.
B&Q-owner Kingfisher slipped a little, off 0.6p to 406.4p, after Morgan Stanley downgraded the stock with a price target of 300p, saying it stands to gain far less from a housing market recovery in the UK than Home Depot in the US.