* FTSE 100 gains 0.2 pct
* Banks gain on U.S. govt plans for Citi; RBS jumps
* Oils, miners bolstered by firmer commodity prices
By Simon Falush
LONDON, Feb 23 (Reuters) - Britain's top share index inched
up by midday on Monday, as a report that the U.S. government
could end up owning as much as 40 percent of Citigroup calmed
nervous investors, bolstering banks and commodity stocks.
By 1131 GMT the FTSE 100 <> had gained 9.51 points at
3,898.57, recovering a sliver of its 3.2 percent fall on Friday,
which took last week's loss to 7.2 percent.
The UK blue chip index closed below the 4,000 level for the
first time in three months on Friday, on concerns that the
global recession is deepening and is down 12 percent this year
after slumping over 31 percent in 2008.
The U.S. Treasury on Sunday declined comment on reports that
Citigroup <C.N> was in talks that could result in the government
taking a 40 percent stake in the company, however the department
said it was open to converting preferred shares into common
equity to strengthen banks. []
This allayed fears that the U.S. bank may be completely
nationalised, resulting in investors moving back into financial
stocks, which had taken a battering last week on growing jitters
about the health of the financial system.
"Those stocks that were aggressively sold off last week,
banks and miners, are bouncing on the expectation that the
government is going to do something decisive on Citi... as this
is removing uncertainty," said Rob Griffiths, strategist at
Cazenove.
Royal Bank of Scotland <RBS.L> was the top gainer on the
blue-chip index, up 14 percent after a banking source said on
Sunday that it is to announce a restructuring this week to
create a non-core division into which unwanted assets will be
placed. []
"Banks remain in focus, they are pivotal in terms of the
market," said Jeremy Batstone-Carr, analyst at Charles Stanley.
"Efforts to ring-fence toxic assets at RBS and the fact
there appears to be no all-out nationalisation of Citi is
steadying the ship."
Britain's state-owned Northern Rock bank plans to increase
its mortgage lending by up to 14 billion pounds ($20.33 billion)
over the next two years, a Treasury official said on Sunday.
The plan to get Northern Rock lending again is part of a
series of initiatives expected this week, designed to get credit
in Britain flowing again after the economy shrank by 1.5 percent
in the last three months of 2008. []
Other banks were also strong gainers with Barclays <BARC.L>,
HSBC <HSBA.L> and Lloyds Banking Group <LLOY.L> up between 1.9
percent and 7.3 percent.
Mining stocks also buoyed the blue-chip index as metals
prices recovered slightly from heavy losses posted last week.
Anglo American <AA.L>, BHP Billiton <BLT.L> and Xstrata
<XTA.L> added 2.6 percent to 3.4 percent.
Rio Tinto <RIO.L> gained 1.1 percent after a newspaper said
it would try to persuade irate shareholders to back a $19.5
billion tie-up with Chinalco by offering them bonds on the same
terms as Chinalco. []
Prudential <PRU.L> gained 3.2 percent after the Sunday
Telegraph reported that Clive Cowdery, the entrepreneur founder
of the financial buy-out firm Resolution <RSL.L>, has approached
the insurer to assess its interest in selling its UK operations.
This helped lift peers Legal & General <LGEN.L> and Aviva
10.6 percent and 5 percent higher respectively.
($1=.6887 Pound)
(Reporting by Simon Falush; Editing by Sharon Lindores)
