LONDON (AFP) — London shares finished up slightly on Tuesday, but a broad recovery from yesterday's cataclysmic losses was undermined by huge plunges in the banking sector.
The FTSE 100 index of leading shares gained 0.15 percent at 4596.42 points.
Royal Bank of Scotland (RBS) shares plunged 39.2 percent -- or 58 pence -- at 90 as it denied reports it had sought a government cash injection while other major banks also fell sharply.
RBS hit a 13-year low in early trade amid rising speculation that public funds will be required to provide the bank with a cash injection.
HBOS fared even worse, losing 66.7 pence -- or 41.5 percent -- to close on 94.
It and another major bank, Barclays, categorically denied they had sought capital from the government despite reports that they and Lloyds TSB had urged Chancellor of the Exchequer Alistair Darling to quickly mount a rescue plan.
Darling was to meet Prime Minister Gordon Brown and Bank of England Governor Mervyn King at 1600 GMT.
The second consecutive day of heavy share price falls for RBS, and smaller but still substantial losses for Barclays and Lloyds TSB, could increase the pressure on the government to step in soon.
Tuesday's losses took the fall in RBS's stock value to about 80 percent in the year since the credit crunch began with the collapse of the US subprime home loan market.
Just 12 months ago RBS was riding high, leading a consortium in an attempted 100-billion-dollar takeover of Dutch bank ABN Amro.
Another factor depressing its shares was Monday's news that ratings agency Standard and Poor's had downgraded the bank, meaning that analysts believe it is a less safe destination for lenders' money.
The other major banks also had another tough day even though the FTSE overall was up about one percent nearing the finish. In late trade, Lloyds TSB was down by almost 14 percent to 223.25 pence and Barclays off 12.3 percent at 275.50 pence.
In a day of feverish speculation, RBS rejected a BBC report that it had asked Darling for fresh capital in an emergency meeting late Monday.
"Contrary to press speculation, RBS did not make a request to government for capital," the bank said in a brief statement to the London Stock Exchange.
Barclays also firmly denied it had asked the government for cash.
Chief executive John Varley told a banking conference: "Contrary to press rumours, Barclays has not requested capital from the government and has no reason to do so."
Lloyds TSB, which is in the process of taking over its rival HBOS, said it was looking at "opportunities" to raise capital.
"We're taking a number of actions to reach this target, like paying a full-year dividend in shares," it said.
The BBC reported that RBS, Barclays and Lloyds TSB had asked Chancellor of the Exchequer Darling to help them find fresh capital, with the government using taxpayers' money to buy directly into the banks.
RBS was the most traded stock, seeing 485 million units change hands, followed by Vodafone which saw 246 million shares switch owners.
Friends Provident topped the leaders board, gaining 10 pence -- or 13.3 percent -- to close at 85.
It was followed by Vedanta, up 101.2 pence -- or 11.2 percent -- to close at 1005.
In the currency markets, sterling continued its losses against the euro, down 0.055 at 1458GMT but recovered some of yesterday's heavy losses against that US dollar, gaining 0.204 by the same time.
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