Newspaper article The Evening Standard (London, England)

Shares Are Driven Down by Banks' Continued Frailty

Newspaper article The Evening Standard (London, England)

Shares Are Driven Down by Banks' Continued Frailty

Article excerpt


THERE was little for stock market investors to cheer when trading resumed this morning after the weekend break. Another major sell-off in shares of Lloyds Banking Group, following Friday's shock news of losses totalling almost [pounds sterling]11 billion at its newly acquired HBOS subsidiary, combined with the biggest collapse in the Japanese economy for 30 years to drive share prices lower.

On top of that was Wall Street's closure this afternoon for Presidents' Day birthday. Against such a gloomy backdrop, share prices in London had only one way to go -- down. But the losses were not as bad some might have feared and the FTSE 100 index managed to restrict is deficit to 28.97 at 4160.62.

Naturally enough, it was the banks that led the market lower. After a tentative start, Lloyds Banking Group was eventually uncrossed at 52.8p, before rallying a tad to trade at 54.5p, a fall of 6.9p, despite denying speculation that the majority of its shares will soon be owned by the Government. The shares have fallen more than 40% during the past couple of trading sessions and 80% since merger with HBOS was first pressed on the company.

Royal Bank of Scotland, the other bank maintained in the Government's golden circle of bailed-out banks, fell 0.8p to 21p, while Barclays shed 6.5p to 94p. Other financials also came under the hammer, including Legal & General, where there is persistent talk of a rights issue, down 1.6p at a record low of 47.9, and Prudential, 7p cheaper at 3133/4p.

UBS has begun coverage of two oil explorers Tullow, 5p better at 7311/2p, and Soco International, a penny better at 1161p. It has started with a buy rating on both companies and an 1830p target on Soco. UBS has also raised it rating on BT Group. up 0.8p at 99.8p, from sell to neutral with a 95p target in the wake of last week's gloomy trading update.

The broker reckons the shares have fallen far enough but warns there are still too many risks to get excited. The valuation is not attractive with key performance indicators having weakened.

BT needs to protect the top line and the broker sees fibre technology as the answer. …

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