London midday: Banks lower on margin worries

12th May 2009 12:13

The market had an indecisive morning, with yesterday's decline after four successive days of gains giving investors pause for thought. Banking is the weakest sector after a cautious review of UK banks by Credit Suisse. The Swiss bank has cut its ratings on Barclays and Royal Bank of Scotland, with the former rated at 'neutral' and the latter at 'underperform'. Credit Suisse has upped its price targets for Royal Bank of Scotland and Lloyds Banking Group but in both cases the new target prices are below the current share prices; Royal Bank of Scotland has had its target price increased from 25p to 30p, while Lloyds' price target is boosted to 65p from 45p.Credit Suisse believes banking margins will come under more pressure than is currently realised, due to new rules on liquidity, along with other regulatory changes, and the need to compete more vigorously for retail deposits. On a positive note, retailers such as Tesco, Wm. Morrison and Next are wanted after relatively upbeat retail sales figures from the British Retail Consortium.Outsource giant Serco is going well after the firm, whose range of activities includes London's Docklands Light Railway, reported a strong start to 2009 with £1bn in new contracts and preferred bidder status on another £250m's worth. Fears for the future of the dividend are undermining Imperial Tobacco, the company behind Lambert and Butler cigarettes. The company moved into losses due to the costs of restructuring its latest acquisition, the Gauloises firm Altadis.Pubs group Enterprise Inns has called time on its dividend as it seeks to pay down its debt pile. The company announced an interim pre-tax profit of £103m, in line with market expectations but down from £132m a year earlier. Holiday Inn hotel chain InterContinental Hotels Group said occupancy rates started to stabilise in the first quarter but room rates came under pressure. Revenue in the first three months of 2009 ease to $342m from $448m a year earlier. Ireland-based Tullow Oil has performed strongly in 2009 to date and said the outlook for the rest of the year remains 'very positive'. The Jubilee development is on track for first oil in the second half of 2010 and the group has maintained a 100% success rate with its drilling operations in both Ghana and Uganda where the Tweneboa-1 and Giraffe-1 wells, in particular, yielded substantial new discoveries.Redrow said it has restarted construction on certain developments as sales volumes look to have stabilized but cautioned that the market is likely to remain challenging into 2010.Power generator International Power said its portfolio is performing in line with expectations in 2009. Outlook for the year as a whole remains little changed from the situation outlined in mid-March, when the company said 2009 profits are likely to be below 2008 levels unless prices improve in the UK and USA.Support services group Babcock has charged forward after it reported a forecast busting full year profit, upped its dividend and predicted good growth prospects. Oil services group Wellstream fell after it warned supplier problems have reduced profitability by around £7m or £8m this year, while engineer Tomkins is being whacked by the problems besetting General Motors and Chrysler.Hovis to Bird's Custard group Premier Foods pushed sales up by 3% in the first four months of 2009 helped by price rises last year. Profit expectations for this year are unchanged.General insurer and reinsurer Brit Insurance has seen an improved trading environment in 2009. Gross written premiums in the first quarter were up 40.5% to £557.4m from £396.7m a year earlier. At constant exchange rates, the growth was 18.5%.Acquisitive transport and logistics firm Stobart Group is entering a consolidation phase after registering a sharp increase in profits in its first year as a listed company. Profit before tax soared to £23.9m in the year to end-February from £3.5m the year before, partly reflecting the contributions from acquisitions such as James Irlam, WA Developments, Innovate Logistics and Southend Airport.FTSE 100 - RisersSerco Group (SRP) 404.25p +6.24%Amlin (AML) 375.00p +5.41%Tesco (TSCO) 349.40p +2.76%Morrison (Wm) Supermarkets (MRW) 242.00p +2.54%FTSE 100 - FallersLloyds Banking Group (LLOY) 91.10p -8.26%Lonmin (LMI) 1,354.00p -7.26%Barclays (BARC) 272.50p -5.05%Royal Bank of Scotland Group (RBS) 43.80p -4.99%FTSE 250 - RisersBabcock International Group (BAB) 480.50p +16.63%Stobart Group (STOB) 106.00p +9.00%Brit Insurance Holding (BRE) 201.50p +8.77%FTSE 250 - FallersDS Smith (SMDS) 71.00p -9.84%Ferrexpo (FXPO) 136.50p -6.98%Helical Bar (HLCL) 312.00p -5.45%