UK and European financial institutions faced declining market sentiment in early trading today, while the cost of credit protection on US banks continued to rise. Five-year senior credit default swap (CDS) spreads referencing the Royal Bank of Scotland widened to 140.7 basis points at 10:30am London time today from 136.7bp at the close of trading yesterday, ahead of a shareholder vote on the proposal to raise £20 billion of capital as part of the UK Treasury's industry bail-out.Spreads on HSBC, which cut a further 500 jobs in its Asian operations yesterday, widened to 109.1bp from 108.7bp. The cost of protection on Lloyds TSB - which is seeking investor approval for its proposed takeover of HBOS today - increased to 91bp from 89.9bp, while HBOS saw its spreads move out to 132.8bp from 130.3bp, according to credit information specialist CMA DataVision. CDSs on Barclays, which announced on November 18 it will not pay annual bonuses to its executive directors this year, moved out to 148.3bp from 145bp. Elsewhere, CDSs on Dutch banking giant ING, which reported its first-ever quarterly loss last week, widened to 101.8bp at 9:30am London time today, up just 0.1bp from yesterday. Swiss banking giant UBS, currently the subject of a high-profile US tax fraud investigation, saw its CDS spreads move out to 155bp from 151.8bp. Spreads on Deutsche Bank moved out to 125.2bp from 123.3bp, while CDSs on local rival Commerzbank widened to 69.4bp from 66.7bp The cost of credit protection on France's Crédit Agricole widened to 80.3bp from 78.5bp and CDSs on Société Générale moved out to 109.1bp from 108.5bp. The cost of protection on France's biggest bank, BNP Paribas, increased to 64.7bp from 60.3bp. In the US, CDSs on insurance giant AIG, set to receive an expanded government rescue package worth more than $150 billion, tightened to 776bp at the close of New York trading yesterday from 796.8bp the previous day. Spreads on the firm were as high as 3,016.9bp on November 7. Fellow insurer Genworth Financial saw its CDS spreads widen to 1,980.9bp from 1,863.3bp. The company is involved in talks to acquire Minnesota savings bank InterBank, which will give it access to the US government's Troubled Asset Relief Programme. CDSs on Citi - which is slashing 75,000 jobs after racking up $20.3 billion in losses this year - moved out to 239bp from 227.8bp, while the cost of protection on Bank of America, which announced on November 17 it would boost its stake in China Construction Bank, tightened to 136.9bp from 139.6bp. Merrill Lynch saw its CDSs expand to 197.5bp from 194.9bp. The cost of credit protection on Morgan Stanley, which will follow fellow former investment bank Goldman Sachs in cutting around 10% of its workforce, increased to 419.6bp from 419.3bp. CDSs on Goldman - the first US bank to announce plans to scrap 2008 bonuses for senior executives - moved out to 315bp from 310.3bp. Spreads on JP Morgan, reported to be conducting a global review putting thousands of jobs at risk, widened to 122.2bp from 119.9bp. Spreads on Wells Fargo, which has now raised $12.6 billion in stock to help fund its acquisition of Wachovia, moved out to 97.1bp from 94.8bp, while CDSs on Wachovia tightened to 129.7bp from 131.3bp....
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