MONDAY MARKET CLOSE: Bank stocks under stress after tests

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Lloyds Banking Group was on the back foot as it lagged its UK peers in the European Central Bank’s stress test league tables.

All the British lenders passed the tests by a reasonable margin, but with the lowest score there was speculation that Lloyds would have to put extra capital aside to boost its core ratio for a UK version due in December.

Mike van Dulken, head of research at Accendo Markets, said: “The Bank of England has emphasised that its own upcoming tests will be much more stringent – think 35 per cent house price crash due to the UK importance of property within lending – which is weighing on sentiment given Lloyds is the biggest UK lender.”

Ahead of results today in which it is expected to announce sweeping job cuts, Lloyds was 1.38p lower at 75.34p.

Despite the fact that the Europe-wide test results were generally considered positive, other financial stocks were also lower. Barclays slipped 4.5p to 221.85p and Royal Bank of Scotland was 5p lower at 359.2p. And in the wider sector Aberdeen Asset Management was out of favour too, down 10.6p at 400.9p.

The FTSE 100 was down 25.27 points at 6,363.46 as heavyweight mining and oil stocks continued to exert a downward influence amid weak commodity prices. Fresnillo was down 2.7 per cent at 746p.

Engineer Smiths Group was also on the fallers’ board, dropping 31p to 1,121p after announcing the departure of its finance director.

Travel stocks dominated the risers’ board, boosted by the falling price of oil and reduced concerns over the Ebola virus.

TUI Travel rose 2 per cent or 9.1p to 374.7p, Intercontinental Hotels lifted 51p to 2,268p and British Airways owner IAG rose 6.5p to 389.8p.