BANKING stocks rallied higher yesterday amid reports of Government plans to offload its bank stakes.

Part-nationalised Royal Bank of Scotland was one of the leading risers – up five per cent – as investors cheered speculation the Government may look to recover some of the taxpayers’ £70bn investment even before a marked improvement in their share prices.

The wider FTSE 100 Index also closed in positive territory, up 25.1 points at 4461.9, buoyed also by a strong opening on Wall Street.

But the FTSE 100 still failed to break the 4500 barrier – a level proving hard to sustain after the commodities- based rally earlier in the week.

Oil firms in particular gave back recent gains, with Royal Dutch Shell off 28p, at 1697p and BP down 8.75p, at 524.25p.

Barclays topped the risers board as the banking sector was lifted amid speculation around how UKFI, the Government body responsible for taxpayer stakes in statebacked banks, could recover part of the country’s investment. Shares in taxpayer- backed banks RBS and Lloyds Banking Group gained 1.8p, to 39.7p and 1.7p, to 66.7p, respectively.

Meanwhile, HSBC gained 12.25p to 548.25p.

The main corporate news of the session came from Home Retail Group, after it reported the first positive sales figures from its Homebase DIY chain in two years.

The demise of MFI and Woolworths helped trading and shares rose 5p, to 271p. Tesco rose 5.7p, to 363.3p ahead of a trading update next week and B&Q owner Kingfisher failed to benefit as shares slid 3.4p to 193.6p.

Shares in travel group Thomas Cook continued to show volatility after the collapse of its principle stakeholder, Arcandor.

Stock was 2.75p higher at 221.75p, a gain of over one per cent.