FTSE edges down early on banks; commodities rise

By Dominic Lau

LONDON, April 22 (Reuters) - Britain's FTSE 100 .FTSE index edged down early on Tuesday as concerns that other banks would follow Royal Bank of Scotland (RBS.L) in raising capital through rights issues offset gains in commodity shares.

By 0738 GMT, the FTSE 100 .FTSE was down 12.5 points, or 0.2 percent at 6,040.5, after easing 0.06 percent on Monday.

Royal Bank of Scotland (RBS) slipped 0.6 percent after the lender announced a record 12 billion pound rights issue to cover a potential 5.9 billion pound writedown on the value of toxic assets and help rebuild a stretched balance sheet. [ID:nL22463702]

RBS will offer 11 new shares for every 18 existing shares at 200 pence per share in the rights issue, Europe's biggest ever, representing a 46 percent discount to Monday's closing price.

"Everybody has to go through some pain when it comes to restoring a balance sheet. This is probably one of the better ways in which it can be done," said Peter Dixon, UK economist at Commmerzbank.

"What a rights issue does is that it recapitalises its own balance sheet. It does not have to rely upon the Bank of England's temporary measures to block up a hole."

Elsewhere in the banking sector, Barclays (BARC.L). Lloyds TSB (LLOY.L) and HBOS HBOS.L were down between 0.3 and 3.4 percent respectively.

Bradford & Bingley BB.L added 0.8 percent after the UK lender said demand for buy-to-let mortgages remained strong but arrears continued to rise in the first quarter, with falling house prices expected to drive up bad debt provisions in 2008. [ID:nL22444138]

U.S. stocks ebbed overnight as weak quarterly results from Bank of America Corp (BAC.N) rekindled concerns about the toll the credit crisis has taken on banks, and overshadowed rising energy shares as oil closed at a record high. In Asia, Japan's Nikkei average .N225 fell 1.1 percent.

Oil shares were in demand with BP (BP.L) up 1 percent, Royal Bank of Scotland (RDSa.L) adding 0.2 percent and BG Group (BG.L) gaining 0.6 percent.

Miners also rose, helped by firm metal prices. Kazakhmys (KAZ.L), BHP Billiton (BLT.L), Rio Tinto (RIO.L), Anglo American (AAL.L), Xstrata (XTA.L), Vedanta Resources and ENRC (ENRC.L) were up between 0.2 and 2.5 percent.

Associated British Foods (ABF.L) slipped 2.7 percent after the owner of Primark discount clothes stores and the Silver Spoon sugar refiner posted a 5 percent rise in first-half profit and said economic conditions were difficult.

Sugar maker Tate & Lyle (TATE.L) dropped 3.5 percent. (Editing by David Cowell)