Yesterday’s trading: No end in sight to credit crunch

By Geoff Foster for MailOnline
Updated:

 

Specialist finance house Intermediate Capital in January grabbed the credit crunch by the horns and launched a £175m rights issue to raise funds that would allow it to cash in on opportunities created by the devastation wreaked in debt markets.

Geoff Foster, Daily Mail City

Geoff Foster, Daily Mail

Managing director Tom Attwood has so far shrewdly kept his powder dry as he warned that problems in the credit market will not be solved soon and markets can expect further and considerable volatility.

Attwood worryingly added that investment banks continue to hold hundreds of billions of syndicated debt on their books and are being forced to sell at increasingly high discounts.

Indeed, he said the syndicated debt market has gone from awful to appalling with loans being sold at as little as 80% of face value.

Whilst scaring the pants off many dealers who thought the credit crisis was almost over, he reported a better-than-expected set of full-year results which sent bears scurrying for cover.

The shares, which had been shorted by almost 10% in the run up to the figures, shot 184p higher before closing 146p better at 1610p.

Although the 32% increase in the impairment charge to £46m caused analysts some concern, news of a 2% rise in pretax profits to £229.5m and an 18% hike in the dividend to 65p brought huge sighs of relief.

Funds under management increased 25% to £7.3bn. Broker Merrill Lynch reiterated its bullish stance and 1950p price target.

Credit Suisse told clients that it is still too early to buy banks, warning there is still scope for a big increase in mortgage risk weighted assets.

Lloyds TSB shed 8¾p to 384¾p as the broker downgraded to underweight from neutral and slashed its target price to 345p from 460p.

It believes the bank's earnings are more exposed to the economic downturn than most other banks because of its UK retail arm, small-mid corporate and commercial property exposure.

Beleaguered mortgage bank Bradford & Bingley, which is looking to raise cash at 82p a share, nosedived 5p to an all-time low of 97¼p.

The Footsie regained 11.1 points to 6069.6, closing well below the best after Wall Street lost a 50-point gain to trade 46 lower.

Early strength on the Street of Dreams owed much to a government report that showed orders for big ticket items declined less-than-expected in April. As the oil price dipped below $126 a barrel on profit-taking before recovering to nearly $130, British Airways climbed to 228p and closed 3½p dearer at 218¼p.

No frills airline easyJet rallied 17¼p to 291¾p after chief executive Andy Harrison bought 187,452 shares at 264¾p.

Cruise giant Carnival steamed 52p ahead to 1894p but BP slipped 11p to 605½p, and Cairn Energy 56p to 3315p.

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Housebuilders remained friendless with Taylor Wimpey off 2¼p more at a low of 93½p. Rumours of US writedowns continue to do the rounds. 'It just doesn't smell right,' said one fund manager.

Barratt Developments fell a further 10¼p to 200½p after Tuesday's sale by an institution of 7m shares at 208p. The year's peak was around £11.

Telford Homes, the residential developer in East London, jumped 12¼p to 129½p on strong annual results. Turnover rose 54% to £160m as it continued to reap the benefits from the ongoing regeneration of East London in anticipation of the 2012 Olympics.

Profit-taking following good results left Speedy Hire 4½p easier at 677p. Record results showed pretax profits rising 19% to £48m and revenues 39% up at £466m.

Broker Oriel Securities is bullish and says the market is discounting a downturn in the group's fortunes that is unlikely. The valuation is undemanding.

Dog of the day was construction minnow Silverdell which collapsed 49p to 85½p after incurring a £1.1m loss last year compared with a profit of £400,000 in the previous year.

Disappointing first-half figures prompted a fall of 11¼p to 51p in electronic equipment company Abacus.

Eurasia Mining edged up 0.13p to 3.38p after securing a Russian partner to invest in its platinum mining projects in Russia. Delloan Investment has agreed to invest a minimum of £1m through the issue of loan notes convertible into Eurasia equity.

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