Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

THE banking sector was back in the spotlight as the City continued to ponder the outlook for High Street banks and their dividend strategies.

There was further heavy turnover in Lloyds TSB, down 9 1/4p at 410p as more than 30m shares changed hands ahead of Friday's full-year numbers. The shares rose sharply on Tuesday as broker Credit Suisse First Boston assured clients there was no chance of Lloyds, which owns Scottish Widows and Cheltenham & Gloucester, cutting its 33.7p dividend because of heavy write-offs. It argues that the bank may even indicate it is prepared to offer regular increases in the payout to shareholders once 2003 is out of the way.

That view runs contrary to a lot of City speculation at present. The cost of maintaining the dividend would be about £2bn. The shares currently yield more than 8%, making them among the most attractive in the sector. Rival Abbey National, which has had more than its fair share of troubles of late, is expected to halve its dividend when it reports. The shares dipped 8p to 416 1/2p, having recently traded as low as 385p.

Goldman Sachs reckons there is plenty of value in the banks and has upgraded the European sector from 'cautious' to 'neutral'. It says oversold positions and little difference in valuations in the sector make it a good time for investors to do some shopping. Top of Goldman's list are ABN Amro, BNP Paribas and UBS. British picks include Lloyds TSB and Royal Bank of Scotland, 11p better at 1449p.

Some of the other banks extended Tuesday's gains after a slow start. HBOS rose 8p to 589p and HSBC put on 5p to 655 1/2p but Barclays, reporting on Thursday, lost 11 1/4p to 342p.

Elsewhere, share prices came off the boil following Tuesday's strong performance.

The growing prospect of war with Iraq and falls on Wall Street this afternoon hit sentiment. In another day of thin trading in London, the FTSE 100 index fell 53.1 points to 3616.10.

Shares of Dixons slumped 6 1/4p to an eight-year low of 93 3/4p after a downbeat meeting with brokers and a downgrading of the retailer's credit rating by Fitch. That dragged Marks & Spencer 13 1/4p lower to 297p, GUS 19p to 504p and Kingfisher 10 1/2p to 195p.

Satellite broadcaster BSkyB firmed 3p to 580p ahead of interim results on Friday. CSFB has raised its recommendation from 'neutral' to 'outperform' and set a target price of 660p. It is forecasting a surge in margin growth from almost 10% in 2002 to 29% this year and reckons management will highlight the scope for double-digit growth in full-year advertising revenue.

BNP Paribas has cut its target price for British Airways, down 5 1/4p at 112 3/4p, from 180p to 130p following Monday's results. Reuters slipped 4 1/2p to 160 3/4p after Morgan Stanley repeated its 'underweight' rating, outlining difficulties facing the group on its restructuring. The shares were also undermined by dismal results from Reuters' separately quoted share-trading arm Instinet, which Tuesday posted a net fourth-quarter loss of $112m (£69m) against a profit of $46m last time.

Six Continents firmed 5 1/2p to 520p on reports that Hilton Group, down 3 1/2p at 145p, wants to arrange a merger of their hotel interests. Six Continents is currently setting up the demerger of its pubs.

• Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed on the site.

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