FTSE 100 close: Lloyds takes cash-call hit

By ADRIAN LOWERY
Updated: 12:26 EDT, 10 August 2009

Shares in Lloyds Banking Group were one of the Footsie's big losers, falling nearly 5% after reports that the UK lender may consider a multi-billion pound share issue as part of a partial withdrawal from the government's asset protection scheme.

'If this is true, it can create a fair bit of dilution in the share price because nobody knows how successful any placing or rights issue is going to be. There is uncertainty about that, which is why the price is lower,' a trader told Reuters.

'But once that's out of the way, then people will realise that this is a better option because the government is no longer directly involved in the bank and the bank does not tie to pay a huge sum of money for the servicing of the borrowing it has.'

Shares were 4.11p down at 97.89p.

Investors remained wary over Royal Bank of Scotland after pessimistic comments from chief executive Stephen Hester when he delivered at the bank's half-year figures on Friday. Shares fell 1.68p to 45.31p. Barclays for its part was 7.2p down at 357.8p.

Pressure on mining stocks also caused the wider London market to surrender much of the boost handed by Friday's better-than-expected unemployment figures in the United States, with the FTSE 100 Index 9.4 points closing lower at 4,722.2.

Retailers were also prominent on the fallers board, with Marks & Spencer down 9.4p to 340.1p and Tesco 4.1p cheaper at 366.1p, a drop of 1%.

Dove-to-Magnum ice cream consumer goods firm Unilever meanwhile ticked 23p lower to 1,595p in the wake of strong second-quarter sales figures last week.

The biggest gain in the top flight came from Friends Provident after the insurer's board said it would begin talks over a £1.86bn approach from Resolution. With speculation pointing to a possible deal in time for tomorrow's interim results from Friends, shares jumped 7% or 4.9p to 75.00p.

Other insurers on the front foot included Prudential, which climbed 14.5p to 487.0p ahead of figures later in the week.

Telecoms giant BT was also making progress after a broker upgrade. The firm added 2.7p to 134.15p as JP Morgan said the company was in a position to outperform market forecasts.

Music and games retailer HMV led the FTSE 250 Index after it was reported chief executive Simon Fox had ruled himself out of the running for the top job at ITV. Shares, which climbed 5p to 121.0p, also benefited from a broker upgrade by HSBC.

Shares in Southern Cross fell 9.5p to 140.25p after the care home group's interim statement disappointed. Southern Cross says its adjusted earnings for the 14 weeks to 5 July came to £22.4m, down 9% on a year earlier.

But construction group Morgan Sindall edged 4.5p down to 620.5p despite striking a reasonably positive tone in interim results. The company reported a 28% slide in profits but expects to grow orders in the second half of the year.