Natwest and Lloyds Lead FTSE 100 Rally as Banking Stocks Rebound
Natwest shares have surged on the stock market this morning, leading a significant rally across Britain's major banking institutions as lenders recover from a challenging week. The bank topped the FTSE 100's risers at the opening bell, gaining over four percent in early trading to reach 603.60p.
Banking Giants Show Strong Recovery
Barclays followed closely behind Natwest, advancing more than 2.5 percent to 465.75p, while Lloyds Banking Group gained nearly two percent to 102.15p. Asian-focused lenders HSBC and Standard Chartered also demonstrated positive momentum, each climbing approximately two percent during Monday's trading session.
Richard Hunter, head of markets at interactive investor, commented on the market movement: "For the FTSE 100, gains were led by some of the stocks which had been under pressure last week, such as data providers and the banks, both of which were caught up in the AI disruption debate."
Market Context and Performance
London's blue-chip index increased by 0.3 percent to 10,474.84p in early trading. Despite a two percent jump on Monday morning, the FTSE 350 bank index continued to struggle with a four percent decline overall. This recovery follows what analysts have described as an "overreaction" to recent banking sector developments.
The banking sell-off last week came after Natwest announced its largest deal since the global financial crisis, acquiring wealth manager Evelyn Partners for £2.7 billion. Market participants expressed concerns that the bank might have overpaid, with additional unease stemming from the deal's heavy reliance on cost synergies for delivery. Following the announcement, Natwest's stock fell six percent during the trading session.
Recent Banking Sector Challenges
On Friday, Natwest initiated a substantial dividend payout after reporting its highest profit since 2008, but this positive development failed to excite markets, with the firm's shares falling approximately four percent. Meanwhile, Barclays experienced a two percent decline on Tuesday despite exceeding profit expectations and announcing plans to distribute £15 billion to shareholders.
Chris Beauchamp, chief market analyst at IG, provided insight to City AM: "It was interesting that we saw such a sharp drop for several banks last week, which is perhaps a reflection of how strongly they have performed, leaving them vulnerable to profit-taking. But the big banks (save for HSBC) still aren't really expensive, with plenty of room for further growth. This looks like an overreaction, but one that investors should be pleased to see, since it helps reset the sector rally without it becoming too frothy."
Defense Sector Also Shows Strength
Elsewhere on the FTSE 100 this morning, Babcock International—a key support provider for the UK's nuclear submarine fleet—enjoyed a surge of over two percent following rumors that the UK government is considering increasing defense spending. According to BBC reports, Sir Keir Starmer is contemplating meeting the existing target of three percent of GDP allocated to defense earlier than initially planned, which was originally scheduled for the end of the next Parliament.
Melrose Industries also gained more than two percent on this news, with BAE Systems following closely behind with a 1.5 percent increase. This broader market movement indicates a positive shift across multiple sectors following recent volatility.
