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FTSE 100’s vaccine-driven recovery unravelling as bank shares suffer more falls

<p>High street banks will have to set aside even more cash to cover loan defaults </p> (AFP via Getty Images)

High street banks will have to set aside even more cash to cover loan defaults

(AFP via Getty Images)

The vaccine-driven recovery of banking stocks is already in danger of unravelling after shares in heavyweights including Lloyds suffered more big falls today.

The read-across from Virgin Money's results yesterday has clearly spooked investors as the challenger bank posted a bigger-than-expected bad debt provision of £501 million.

Those worries that high street banks will have to set aside even more cash to cover loan defaults next year won't have been helped by Chancellor RIshi Sunak's assessment that Britain's economic emergency has only just begun.

The independent budget watchdog also weighed in with a warning that house prices could fall 8% next year.

Having risen by as much 40% this month on the back of Covid-19 vaccine optimism, shares in Lloyds Banking Group fell 3.5% yesterday and were down another 1.2p to 36.9p today.

NatWest slipped 4.8p to 158.65p, Barclays was 4.2p cheaper at 139.2p and FTSE 250 stock Virgin Money fell another 8% or 11.35p to 128.65p, on top of the 5% decline yesterday.

The FTSE 100 index dropped 34.02 points to 6,357.07, with Persimmon among the biggest fallers as sentiment also weakened towards the housebuilding sector. Shares slipped 103p to 2,731p, while Barratt Developments was off 9.6p to 626.6p.

The domestic-focused FTSE 250 index closed 1.1% lower last night and continues to be weakened by the Chancellor's guidance after falling another 161.16 points to 19,408.23.

This included weakness for many of the companies behind the recent rotation into value stocks. Upper Crust food business SSP, which almost doubled in value at one point this month, was down 4% or 15.4p to 334.6p today.

Bodycote, a specialist in heat treatment and thermal processing services, came under pressure after reporting revenues 20% lower year-on-year for the July to October period. While this is better than 28% in the previous three months, shares still tumbled 42p to 725p.

On a brighter note, Mothercare shares jumped half a penny to 13p after chairman Clive Whiley declared the company's restructuring phase all but complete. Key developments in today's interim results included a funding agreement with the trustees of the group's defined benefit pension scheme.

A year after its loss-making UK stores were plunged into administration, the baby products company has been rebuilding through its network of franchise partners in 40 countries. Its shares have now more than trebled from their low point of 4p in May.