FTSE 100 movers: Banks hit by windfall tax fears; Rolls-Royce boosted by Citi note

(Sharecast News) - London's FTSE 100 was flat at 9,219.42 in afternoon trade on Friday. Rolls-Royce was among the gainers as Citi hiked its price target on the stock to 1,101p from 641p citing three main factors.

The bank, which maintained its 'neutral' rating, said it has increased its 2025 profit forecast by 23% and 2029 by 28%. Citi's free cash flow forecasts have also increased by 13% this year rising to 20% in 2029, it said.

Citi also pointed to an increased mid-term (2030-34) implicit profit growth assumption from 4% to 8%, broadly in line with expected fleet growth.

Finally, it noted around 40p of value for SMR.

"Rolls-Royce may look expensive on profit multiples, but it is in line on cash metrics, which we believe more important," Citi said. "We forecast 12.3% profit compound annual growth rate over 2025 to 2030 and cash conversion peaking at 120% before trending down to 114%, which we use for our valuation."

Banks were under the cosh, with NatWest, Lloyds and Barclays among the worst performers after the IPPR think tank suggested that chancellor Rachel Reeves should levy a new bank tax.

Russ Mould, investment director at AJ Bell, said: "It's hardly a surprise that every cushion is being upended in the hunt for extra cash to fill the much-discussed black hole in the Treasury's finances.

"The issue is whether taxing the banks more will end up stifling the very growth the government is keen to foster, by crimping lending to businesses and households alike.

"The banks will undoubtedly argue as such, and shareholders may not want to see any such raid either. The wider public may see it differently, given how HSBC, Barclays, NatWest and Lloyds are expected to earn some £44 billion between them worldwide in 2025, their third-best year ever, after 2023 and 2024.

"Analysts' forecasts of aggregate dividend payments and share buybacks of almost £28 billion for 2025 from the quartet could also make them a soft political target, but Chancellor Rachel Reeves may be wary of doing something that could put off investors and shareholders as she seeks to earn favour from the markets and attract investment.

"The thorny issue of quantitative easing which provided a boost to the UK economy but arguably ran too hot for too long is complicated. Reining in quantitative tightening could ultimately end up putting embers on the inflation pyre which has had such a damaging impact on UK households."

FTSE 100 - Risers

Rentokil Initial (RTO) 366.00p 2.81% Prudential (PRU) 991.40p 2.59% Rolls-Royce Holdings (RR.) 1,078.00p 1.84% Convatec Group (CTEC) 237.60p 1.80% Fresnillo (FRES) 1,778.00p 1.43% Airtel Africa (AAF) 223.40p 1.36% BP (BP.) 434.90p 1.35% British American Tobacco (BATS) 4,201.00p 1.33% Babcock International Group (BAB) 1,023.00p 1.29% Unilever (ULVR) 4,667.00p 1.24%

FTSE 100 - Fallers

NATWEST GROUP (NWG) 507.60p -5.40% Lloyds Banking Group (LLOY) 78.66p -4.42% Barclays (BARC) 355.50p -3.57% Kingfisher (KGF) 257.90p -2.05% Legal & General Group (LGEN) 248.20p -1.59% JD Sports Fashion (JD.) 98.62p -1.48% St James's Place (STJ) 1,273.50p -1.47% Whitbread (WTB) 3,152.00p -1.28% International Consolidated Airlines Group SA (CDI) (IAG) 382.80p -1.26% Unite Group (UTG) 700.50p -1.20%