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Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:28 EDT, 15 February 2008

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Shares in the High Street banks were in full retreat again today, which does not bode well for next week when the bank reporting season gets into full swing.

Bradford & Bingley slumped 10¼p to a record low of 176¼p, having kicked off the reporting season on Wednesday with a truly awful set of full-year results, which produced a big drop in profits and some scathing comments from the big broking houses.

Morgan Stanley warned things were so bad at B&B that there was potential scope for a run on the bank. Its worst-case scenario put a value on the shares of just 33p.

Next week sees full-year numbers from Barclays, down 15½p at 427½p, on Tuesday, and Lloyds TSB, 14¾p cheaper at 395¾p. But Alliance & Leicester reports on Wednesday and again there is some concern about the outcome.

The shares slumped 18½p to a record low of 525p, making it one of the Footsie 100's worst performers. Citigroup has repeated its sell rating on the shares and slashed its target for the mortgage provider from 575p to 400p to reflect fading hopes of a bid.

Spain's Banco Santander no longer appears to be interested and the broker warns lack of cash will have a significant-effect on the outlook for A&L. The writedowns already announced for 2007 and the expectation of further charges this year will see the tangible net asset value of the bank drop to 367p a share. Citigroup has also slashed its earnings a share forecast from 76.7p to 54p.

Meanwhile, talk persists that several of the banks may be tempted to turn to the City for extra cash in order to strengthen their balance sheets. But bank shares have taken such a battering since the start of the credit crunch that this may turn out to be a non-runner.

Shares generally followed the futures market and reversed early gains as the buyers remained firmly entrenched on the sidelines. The FTSE 100 fell 91.7 to 5787.6, having been almost 36 points higher first thing.

Good news at last for shareholders of Tate & Lyle, up 1p at 509½p. This week the price climbed back above 500p for the first time since September, and the sugar refiner and sweeteners maker said pre-tax profit for the four months to the end of January was marginally ahead of expectations because of a strong performance in America. Second-half pre-tax profits will match the £115.2m of the first six months.

It issued three profit warnings last year, the share price virtually halved, and the company lost its place in the Footsie 100. But not everyone was impressed by the news.

ABN Amro has downgraded T&L from buy to hold, but tweaked its target from 490p to 510p. A better trading performance in the US sweeteners business had been offset by weaker sugar trading and lower Sucralose profitability. Citigroup has repeated its hold rating and 470p target. Numis keeps the shares at reduce with a 450p target and warns 'the worst is to come'.

IMI ran into profit-taking after a strong run yesterday, the price drifting 8½p to 407½p. Speculators point out the industrial machinery group has dropped back from a peak of 637p last year, leaving it vulnerable to takeover. Some are linking it with US conglomerate Honeywell; others say the shares have been inspired by Melrose's offer of 70p a share for FKI, unmoved on 70¾p.

Vedanta Resources led blue-chips higher with a jump of 68p to 2072p after UBS raised the shares from neutral to buy and lifted its target by 300p to 2600p.

UBS upgraded Thus, steady at 109¾p, from neutral to buy while retaining its target of 145p, following the company's recent interim statement.

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MONDAY'S AGENDA

• An announcement from Alistair Darling on Northern Rock's future could come as early as Monday. With Parliament returning from recess and the European Commission stepping up pressure to conclude the crisis, there is talk a decision will be made over the weekend.

• How the capital's shops fared last month will be revealed as the British Retail Consortium reports London sales. Despite the gloom in the sector, the group said this week that trading across the country had risen 2.6% in January, the highest annual rate in four months.

• As fears grow of a sharp correction in the property market, Rightmove releases its house price index. The property website said in January that prices had fallen for the third month in a row, and annual growth had dropped to its lowest for two years. But Rightmove said activity was picking up, as some sellers dropped prices to spark interest.

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