February 1, 2018 / 9:55 AM / a year ago

Banks drive bounceback for FTSE 100 while Shell slides

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* FTSE 100 up 0.1 pct

* Banks lead gains as investors pile back into yield trade

* NEX Group shines

* Shell dips after quarterly cashflow disappoints

By Helen Reid

LONDON, Feb 1 (Reuters) - British shares recovered on Thursday after a two-day swoon, with banking stocks leading gains as results rolled in with mid-cap NEX Group shining while oil major Shell fell back.

Britain’s FTSE 100 rose 0.1 percent by 0930 GMT thanks to a rally in banking stocks, but stayed near its six-week low hit in the previous session.

Shell shares fell 0.9 percent, the biggest weight on the index, after its results showed weaker quarterly cash generation than expected, though overall cash flow for 2017 put Shell on track to beat rival Exxon.

Private equity group 3i nabbed the top spot on the FTSE, up 2.9 percent after reporting a rise in net asset value per share, after increasing its valuation of its ten biggest portfolio investments.

Unilever shares were lacklustre, trading down 0.1 percent after the consumer goods giant

A stand-out performer was NEX Group, jumping up 9 percent to the top of the FTSE 250 after the financial technology firm said “noticeably” more active markets this year had helped its revenues rise.

“Much to get excited about here,” wrote Liberum analysts, noting increased volatility in the FX markets in January drove the firm’s positive outlook.

Banks were the biggest boost, with HSBC, Lloyds , Barclays and Standard Chartered leading gains.

“We are overweight banks and have been for some time,” said James Illsley, UK equity portfolio manager at JP Morgan Asset Management, saying the rising yield environment would benefit banks as well as life insurance stocks.

Shore Capital analysts said HSBC and Standard Chartered were likely to benefit most from rising rates due to their significant reserves of surplus deposits.

While they were up on the day, British stocks underperformed their European peers with the regional benchmarks up 0.7 to 0.9 percent.

With sterling enjoying its best month against the dollar since 2009 in January, the FTSE 100 - whose companies derive around 70 percent of earnings from overseas - has been under pressure.

“The stronger pound is making the UK domestic market look a bit more attractive,” said JPMAM’s Illsley.

“People have been avoiding the UK but what I would detect is with the pound’s recovery people have been having to question that positioning. Some of the overseas equity holdings are now worth less in sterling terms,” he added.

RPC shares fell 4.7 percent after its third-quarter results.

Building products distributor SIG fell 3.9 percent after it said its 2016 profit was overstated.

“This overstatement of profit follows the recently announced overstatement of cash and trade payables in the same division, further raising concerns on the control environment in SIG Distribution,” said Stifel analysts.

Among small-caps, RPS tumbled 12.4 percent after a trading update.

Reporting by Helen Reid; Editing by Toby Chopra

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