U.K. Stocks Pare Gains; Banks Rally as BAE, Rolls-Royce Decline

By Sarah Jones

Feb. 23 (Bloomberg) -- U.K. stocks pared gains, as a rally in banking shares was countered by declines in BAE Systems Plc and Rolls-Royce Group Plc.

Royal Bank of Scotland Group Plc jumped 15 percent on speculation the lender plans to cut costs by more than 1 billion pounds ($1.44 billion) and split into two units.

The FTSE 100 Index rose 3.36, or less than 0.1 percent, to 3,892.42 at 11:51 a.m. in London, after earlier rallying as much as 1.8 percent. The FTSE All-Share Index was little changed, and Ireland’s ISEQ Index lost 0.7 percent.

Royal Bank of Scotland surged 15 percent to 22.1 pence, rebounding from last week’s 11 percent sell off.

Chief Executive Officer Stephen Hester, in a bid to rescue the lender, is planning to cut costs by more than 1 billion pounds ($1.44 billion), partly by scaling back investment banking, said a person familiar with the situation.

The bank will also split itself into two units over the next three to five years, with one entity including the U.K. and other “core” businesses and the second holding operations that aren’t central to the Edinburgh-based lender.

BAE, Europe’s largest defense company, lost 2.9 percent to 393.25 pence. Rolls-Royce, the world’s second-biggest maker of aircraft engines, dropped 3.2 percent to 284.75 pence.

-- Editors: Roger Neill.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.