MARKET REPORT: Frisky financials aid Footsie rally

By GEOFF FOSTER FOR MAILONLINE
Updated: 16:22 EST, 29 June 2009

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Before the credit crisis of 2007/08, Lloyds TSB was rated the sixth safest banking group in the world.

That all changed when it was forced to save HBOS from the knacker's yard, taking on all of the former building society's toxic waste. Now renamed Lloyds Banking Group, and 43pc owned by the UK government, its chief executive Eric Daniels has his work cut out to restore investor confidence in the mortgage giant. Yesterday he got some welcome help from leading US broker Goldman Sachs.

The shares advanced 4.07p to 70.56p after Goldmans placed it on its conviction buy list, upgrading from neutral and raising its target price to 107p from 61p. It believes Lloyds will be the key beneficiary of increased market share concentration in the UK. The valuation is undemanding in the context of its longterm outlook.

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Lloyds will report the lowest credit losses of all Europe's largest capitalised banks by 2011 and will be able to act commercially despite being part-owned by the government.

Favourable broker comment also got Barclays going. It jumped 11.55p to 279.65p after long-term bear SocGen suddenly turned positive in the wake of the £8bn sale of its Barclays Global Investors arm to Blackrock. It upgraded to hold from sell and raised its 2010 target price to 260p from 36p.

Although SocGen continues to adopt a cautious stance on the bank sector, its top pick is Barclays. It says that while not all of its problems have been addressed, evidence suggests a solid foundation for future independent growth has emerged.

Royal Bank of Scotland, 70pc owned by the UK government, and the subject of a recent upbeat circular from the Queen's broker Cazenove, firmed 0.88p to 39p. Caz reckons there is a good chance that the government, via UK Financial Investments, will start selling down its stake before the end of the year.

It was frisky financials that helped the Footsie close 53.02 points higher at 4294.03 on hopes that the worst of the crisis is over.

Traders in New York were also willing to place bets on a worldwide economic recovery and Wall Street closed up 90.99 points higher at 8529.38.

But the major talking point on the Street of Dreams was fraudster Bernard Madoff's 150-year jail sentence. That's a lot of porridge.

The healthier equity trend helped Prudential climb 231/2p to 4223/4p and Legal & General 1.14p to 57.15p. Car insurer Admiral accelerated 271/2p to 8831/2p after Credit Suisse upgraded to outperform from neutral.

A reassuring trading statement lifted media group Informa 191/4p to 231p. It continues to trade in line with 'management expectations despite very challenging trading conditions'. Broker Singer Capital Markets says that while the group is lacking a catalyst and remains in debt-pay-down mode, the valuation has become much more appealing.

Continuing to reflect bid hopes, electrical equipment company Morgan Crucible rose 53/4p to 99p. News that Hargreaves Lansdown is trading ahead of expectations left the close 9p higher at 210p. The investment group said revenues for the 11 months to end-May 2009 are 10pc ahead of revenues for the same period last year. It now expects the full-year outcome to be slightly ahead of top end expectations, currently at £69.1m.

Insurer Gable Holdings firmed 1/2p to 81/2p on pleasing annual results. Pretax profits rose to £910,000 from £510,000 and net insurance margins jumped to 22.5pc from 16.5pc. It recently announced a new contract with a French insurance broker.

Jubilee Platinum soared 18p to 533/4p on the revelation the board is in early stage talks that, if successful, could materially effect the share price. It also advised shareholders to exercise caution when dealing in its shares until a further announcement is made. No more details on the negotiations were given.

Gold explorer Ariana Resources edged up 1/2p to 33/8p after announcing its first gold production from the Sindirgi Gold Project in Turkey. Better-than-expected annual results attracted buyers to marketing software company Portrait Software, 33/4p up at 111/2p. It reported a strong second-half of the year and a good start to the current year including a big contract win from Dell Computers.

Property company Terrace Hill rose 1p to 15p after announcing two lettings, one a prelet to high quality tenants.

SDI, the automated warehousing systems specialist, added 5/8p to 51/2p on news of a confirmed order book of £29m and a pipeline of potential orders of £21m for the current year.