Newspaper article The Evening Standard (London, England)

HBOS Sets Pace as Big Banks Return to Favour

Newspaper article The Evening Standard (London, England)

HBOS Sets Pace as Big Banks Return to Favour

Article excerpt

Byline: MICKEY CLARK

THE end of the credit crunch may still be some way off, but shares in the big banks and mortgage lenders were back in vogue today.

Institutional investors like to think they know a bargain when they see one, and many of these banks have been trading at rock-bottom prices and may now look good value for money. Judging by today's big turnover in the shares, some of those institutions have decided to do something about it. They may have been inspired by the dramatic rally overnight in shares of Wachovia despite the US bank reporting losses of almost [pounds sterling]4.5 billion.

Leading the way in London was HBOS, the UK's biggest mortgage provider, which rose 321/4p to 2931/4p on turnover of 165 million shares as Goldman Sachs added it to its Conviction Buy list with a 400p target. This was despite the bulk of its [pounds sterling]4 billion rights issue having been left with the underwriters. Could it be just coincidence that stories began doing the rounds today that HBOS could soon find itself the target of a bid by the Spanish bank BBVA? There was also talk Dresdner Kleinwort has managed to get rid of its share of the rights issue rump. Either way, the HBOS share price is now trading above the rights-issue price of 275p despite the Spaniards denying plans to bid.

Another mortgage lender, Alliance & Leicester, which has an offer worth 317p on the table from Spanish bank Santander, rose 123/4p to 3401/4p. There were also gains in heavy turnover for Royal Bank of Scotland, up 201/4p at 2191/4p (on turnover of 170 million shares), Barclays, 261/4p to 341p (95 million shares), and Lloyds TSB, 22p to 3421/2p (44 million). Any spare cash the institutions had left after their spending spree appeared to be directed at the housebuilders. They too have been bombed out by the housing slump and credit crisis, leaving most of them looking at ways to raise extra funds.

Barratt, whose price has collapsed from 9631/2p since the start of the year, rallied 181/4p to 109p. Taylor Wimpey was up 5p at 483/4p and Persimmon 161/2p at 3423/4p.

A softening of the oil price gave the rest of the London market a boost, and the FTSE 100 index rose 61. …

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