Authorised and regulated by the Financial Services Authority

The Banks Are Saved

Courtesy of the generosity of the Great British taxpayer HBOS (HBOS) and RBS (RBS) have been saved from a grisly fate. They avoid going to Credit Crunch heaven via a £37bn cash injection. Of this £20bn goes to RBS, the canny people who bought ABN Amro at the top of the market, with £5.5bn going to Lloyds TSB (LLOY), and £11.5bn to HBOS.

HBOS is now being offered only 0.6 of a Lloyds share as part of a recommended lower offer. The only mystery is why Lloyds share holders are paying anything for HBOS, although being paid to do so by the UK taxpayer is one possible explanation?
Despite the intrigue the intrigue the FTSE 100 has managed a sharp rebound from Friday which has to be said, bore all the hallmarks of a near term low given the mass media coverage of the stock market. The UK index is up nearly 6% with Lloyds and Barclays (BARC) up as much as 10%, but RBS and HBOS getting the thumbs down from the market. HBOS is down over 30%, and RBS 20%.
However, there has been a generally improvement in leading stocks with oil stocks boosted by a jump in crude back to over $80. This has caused BP (BP.) and Royal Dutch Shell (RDSB) to put on up to 5% each, with miners doing the same as Gold rises up to $20.
If the stock market is to recover on more than a one day wonder basis we need to see the return of M&A speculation, and after last week’s 20% decline in the FTSE 100, there are certainly some “cheap” looking situations. At least there was a genuine takeover story around in the shape of Tui Travel where there is speculation that the German holding company may make a bid. The stock rose up to 20% towards 230p.
On the corporate news front a feature was Hovis bread maker Premier Foods (PFD) which confirmed that it was in talks to raise funding from private sources. The shares put on over 10% to 63.5% even though until the stock clears the uncertainty regarding its financial position, the possibility of a sustained rally is not that likely.
 

Head of Research at Blue Index, specialists in trading Contracts For Difference

13/10/08

< back