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Market Report: RSA gives second profit warning in a week


The discovery of a black hole in RSA’s Irish accounts sent its shares tumbling yesterday. The insurer suspended three executives at its Irish business late on Friday and warned profits will take a £70m hit this year – its second profit warning in a week.

The stock fell 12.7p to 108.1p as investors got their first chance to react, leaving it one of the worst performers on the FTSE 100. Euan Stirling at Standard Life warned that RSA’s chief executive Simon Lee was under pressure, adding: “Using a Scottish football analogy, I’d say that his coat is on a shoogly peg – in other words not nailed into the wall properly.

However, more weekend news, this time from BT announcing a £900m buy up of European football, saw BSkyB keep RSA off the bottom of the leader-board as it fell 101p to 829p. The wider market was fairly quiet – and the FTSE 100 managed to add 19.95 points to 6,728.37.

Meanwhile, Royal Bank of Scotland – boosted by new data on mortgage approvals via the Help to Buy scheme – was top of the table, up 17.3p to 339.8p, as analysts at Jefferies declared the tax-payer controlled bank’s much-criticised “internal bad bank” might not be such a bad idea. Jefferies rated it a “buy”, arguing there will be more visibility on returns for the core business, and raised its price target to 441p.

JPMorgan Cazenove’s analysts weighed in on miners, warning iron ore prices may weaken and Chinese activity may have peaked. It advised investors to bet mining stocks will fall, leaving Antofagasta, down 18p to 818.5p; Anglo American, down 18.5p to 1,474p, and Rio Tinto, off 45p to 3,274p, among the worst fallers.

On the mid-tier table, the platinum digger Lonmin beat City forecasts with annual profits of $140m, and was 12.8p better at 340.9p.

The funeral services specialist Dignity reported a rise in sales and profits, and was 31p ahead at 1,440p.

Flybe flew up 29.38p to 95.75p when new chief Saad Hammad revealed a return to profit, job cuts and new strategy.

Aim-listed Faroe Petroleum jetted 0.75p to 132.25p after an oil discovery on the Snilehorn Prospect in the Norwegian Sea.