FTSE falls as banks take a hit

Monday, 02 June 2008 12:00

The FTSE 100 fell 0.76 per cent closing at 6007.14 - after falling below the 6000 level over the day as banking stocks took a hit.

Bradford & Bingley started the bad news for banks - after announcing it was expecting a loss ahead of its rights issue and it was selling off a 23 per cent stake to a US investment group for £179 million.

The buy-to-let lender closed down 16.15 per cent to 74p - compared to a high of 435.50p a year ago.

Poor mortgage lending data from the Bank of England also hit the banking sector overall.

HBOS fell 9.69 per cent, RBS was down 1.09 per cent, and Alliance & Leicester fell 4.47 per cent.

Caters Compass Group was up 3.33 per cent after its first-half profits beat estimates, while British Energy rose 3.54 per cent.

Miners BHP Billiton and Kazakhmys both rose 2.9 per cent, while FTSE 100 new entrant medical technology company Smith & Nephew was up 3.32 per cent.

David Jones, chief market strategist at IG Index, said: "Today was the day when a mid-cap mortgage lender sent major shivers throughout the whole financial sector.

"The announcement from Bradford and Bingley of a profit warning, the departure of its chief exec on health grounds and a revised rights issue put pressure on financial blue chips with HBOS down by around eight per cent and Alliance & Leicester off by four per cent."

He explained: "The market viewed this as something of a wake-up call that the woes for the financial system don't just start and end with US subprime - there could be more bad news to come from a situation much closer to home.

"With mortgage approvals in April falling to a new record low since records began the worry now is that further decline in the UK property market and poor sentiment amongst consumers could mean more tough times ahead for UK lenders."

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