Market Report: Abbey National and HSBC shares suffer the backlash

BANKERS once again dominated the stock market. The mould- breaking pounds 1.8bn Lloyds Bank strike at the Cheltenham & Gloucester Building Society and its implications for the mortgage industry put Abbey National and HSBC under pressure as Lloyds bounced ahead.

For weeks there has been hushed talk of big deals being put together but a banking bid for a building society, with only a little of the proceeds going into the market, was one possibility not generally considered.

The Lloyds offer could prompt mirror bids by other banks. But many believe it could be the first call in what could be a round of mega-bids.

There is no doubt that City corporate staffs are working long hours. New issues and cash calls are taking up much of their time - but not all.

Lloyds responded with a 48p jump to 585p, with Seaq putting turnover at 24 million shares.

The market appreciated the calculations and thinking behind the deal, which also ended uncertainties about Lloyds' future direction, which had seemed blurred after its unsuccessful attempts to capture the Midland and Standard Chartered groups.

There have also been persistent rumours that it wanted to absorb the TSB banking group. TSB, presumably on the basis that it could soon see corporate action, rose 5p to 218p.

The prospect of a trading spin- off from the deal for Lloyds Abbey Life, the insurance group controlled by the bank, lifted the shares 21p to 405p.

But fears of more intense competition for the mortgage market lowered Abbey, with Credit Lyonnais Laing saying 'sell', 17.5p to 446.5p and HSBC, largely because of its ownership of Midland, 22p to 723p.

Standard, with bid hopes fading, was at one time down 45p, closing 20p lower at 1,015p. Lloyds still has a 4.62 per cent shareholding, a legacy of its unsuccessful bid in 1986.

Merchant bankers, however, were again in the doldrums as worries continued to circulate about losses they could have suffered in the volatile trading conditions that characterised the first quarter of the year.

Hambros fell 22p to 343p, closing at 348p, and Kleinwort Benson touched 442p, ending at 448p, off 17p. SG Warburg cut an early 10p fall to 1p at 689p. The shares fell sharply on Tuesday and Wednesday.

Schroders, down 7p at 1,208p, enjoyed a Smith New Court buy recommendation with analyst Martin Green saying: 'The share rating is in no way demanding'.

He expects profits to climb from pounds 195.8m to pounds 230.5m and then to pounds 265.8m. Smith fell 7p to 343p.

The rest of the market had a lacklustre session, with the FT-SE 100 index breaking its losing run with a humble 2.9-point gain to 3,101.2. Encouraging retail sales figures, which pushed retailers higher, reduced still further the lingering hopes of an interest rate cut.

A clutch of cash calls was easily accommodated. The food group Albert Fisher, raising pounds 51m, fell 6p to 57p, Babcock International ( pounds 78.6m) put on 3.75p to 37p and Roxboro ( pounds 31m) gained 14p to 284p.

Senior Engineering's rights enjoyed a 95.1 per cent take-up, with the near-three million rump placed by Hoare Govett and Albert E Sharp at about 128p. The shares rose 5.75p to 134.5p.

Bass, ahead of an analysts' visit, fell 5p to 550p. Tesco, following an analysts' meeting, was 4p lower at 207p.

Lasmo was the most heavily traded Liffe contract. The shares climbed another 4p to 145p with the nil-paid rights up 4p to 41p. SG Warburg suggested a switch from Lasmo to Enterprise Oil, up 3p at 448p.

Compass, the contract catering group, was an uncertain market, down 14p at 333p. There was talk of some chunky lines of stock seeking a home.

Vodafone continued to receive encouragement, with Hoare Govett and Societe Generale Strauss Turnbull joining the chorus of support. The shares gained 12p to 512p.

Rank Organisation dipped 3p to 423p as five million were placed at 421p. Warburg was thought to have handled the business.

London International Group's sad decline continued, down another 10p to 104p. The shares have fallen 25p since the restructuring was announced on Tuesday.

Recent new issue Maid, a computer group, fell to a new low, off 6p at 65p. In a controversial flotation the shares were placed at 110p last month. US selling left Micro Focus 47p down at 803p.

William Jacks, a car dealer, advanced 12p to 58p following a sharp profits improvement.

Goode Durrant, the commercial vehicle hire group, gained 18p to 184p following a confident trading statement, which prompted Barclays de Zoete Wedd to lift its year's forecast from pounds 7m to pounds 8.5m and Charterhouse Tilney to go from pounds 7m to pounds 9m.

David S Smith, the packaging and paper group, rose 12p to 565p as Barclays de Zoete Wedd indulged in a spectacular profits upgrading. For the year ending next April the securities house has lifted from pounds 48m to pounds 65m and for the following year moved from pounds 68m to pounds 88m. A European upturn, additional production facilities and lower costs are behind the re-think.

Wyndeham Press, once the SW Wood metals group but now involved in printing and packaging, is paying pounds 6.5m for two related printing operations and a cardboard tubes maker. The deal is funded by an open offer and placing, raising pounds 5.26m. Shareholders are offered eight shares fo every 25 at 100p. Profits of the enlarged group should top pounds 3m. The shares are 105p.

The FT-SE 100 index ended 2.9 points higher at 3,101.2 and the FT-SE 250 index shaded 0.1 to 3,782.5. Turnover was 795.7 million shares with 28,169 deals. The account ends today with settlement on 3 May. Government stocks scored gains of up to pounds 3 4 .

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