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U.K. Stocks Slide, Led by Slump in RBS, Lloyds, Barclays Shares

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July 18 (Bloomberg) -- U.K. stocks declined for a third day amid speculation that European banks will need to raise more capital as stress tests failed to allay investor concern that lenders have insufficient loss-absorbing funds.

Barclays Plc, Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc sank at least 6 percent, leading bank shares lower, as JPMorgan Chase & Co. said European lenders may have to raise about 80 billion euros ($112 billion) of additional capital.

The benchmark FTSE 100 Index fell 90.85, or 1.6 percent, to 5,752.81 at the 4:30 p.m. close in London, extending last week’s 2.5 percent slide. The benchmark measure has slipped 5.6 percent since its peak this year on Feb. 8 as concern grew that the European debt crisis will derail the economic recovery. The FTSE All-Share Index declined 1.3 percent today, while Ireland’s ISEQ Index retreated 0.9 percent.

“Sadly, we think the European banking stress test is unlikely to provide much in terms of assurance to the markets,” Dirk Hoffmann-Becking, an analyst at Sanford C. Bernstein & Co., wrote in a report to clients today. “The concerns about contagion of the sovereign-debt crisis into core Europe have taken center stage and only a substantial change in the governments’ approach could change the current trend around.”

The eight that failed the stress tests have a combined capital shortfall of 2.5 billion euros, the European Banking Authority said on July 15, less than analysts and investors had predicted. As many as 20 banks need to bolster capital, JPMorgan analyst Kian Abouhossein wrote in a report on July 16.

Barclays, RBS, Lloyds

Barclays tumbled 7 percent to 207.7 pence. RBS slumped 6 percent to 33 pence. Lloyds sank 7.5 percent to 41.3 pence.

Lavendon Group Plc surged 4.4 percent to 108 pence, its largest climb in three weeks. The company performed better in the first half than it had forecast, with revenue increasing 8 percent from a year earlier and operating margins widening, the company said.

Rank Group Plc rose 1.8 percent to 153.7 pence as Guoco Group Ltd. said its shareholding will stay at 74.5 percent and Rank said it would remain listed following Guoco’s 150 pence per share offer.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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