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Banks drag FTSE 100 deep into the red

Standard Chartered to take SIV onto balance sheet; Friends Provident slides

By Sarah Turner, MarketWatch

Last Update: 7:01 AM ET Jan 31, 2008

LONDON (MarketWatch) — Britain’s top banks dragged U.K. stocks lower on Thursday
as some investors moved out of the sector after a U.S. rate cut was delivered and
more bad news surfaced about bond insurers, with Friends Provident and Standard
Chartered also contributing negative news to the financial sector.

The FTSE 100 index (UK:UKX) declined 1.1%, or 64.1 points, to 5,772.90, on the
back of big losses for the country’s leading banks.

Shares of Royal Bank of Scotland (UK:RBS) were down 5.2%, Barclays (BCS)(UK:BARC)
fell 6.2% and HBOS (UK:HBOS) shares dropped 4.9%.

Banks had outperformed the FTSE 100 in recent sessions on hopes that the Fed
would deliver a half-point rate cut, a move the U.S. central bank confirmed after
the London Stock Exchange closed for trading on Wednesday.

Financial sector nervousness remerged in the U.S. late Wednesday after shares
closed with losses amid more speculation that bond insurers Ambac Financial and
MBIA Inc. faced downgrades from rating agencies. See Market Snapshot.
Click for Detail

MBIA (MBI) said early Thursday that it swung to a fourth-quarter loss of $2.3
billion, or $18.61 per share, after absorbing a huge loss for the securities it
guarantees due to the U.S. housing downturn. See full story.
Click for Detail

“Investors are unsure about potential holes in balance sheets,” said Edmund
Shing, strategist at BNP Paribas in Paris.

Also in the financial sector, Standard Chartered (UK:STAN) shares fell 3.2% after
the banking group said it will bring the $7.15 billion Whistlejacket Capital
structured investment vehicle onto its balance sheet. See full story.
Click for Detail

Friends Provident (UK:FP.) dropped 11%, as it expects to report an underlying
fiscal-year pretax profit of around 300 million pounds, down about 40% from last
year.

Friends Provident said it plans to largely exit the wealth-management business
after a strategic review, but didn’t say anything about a potential takeover. See
related story.
Click for Detail

Elsewhere, U.K. corporate giants Vodafone Group, AstraZeneca and Royal Dutch
Shell generally tracked the wider market after issuing few surprises.

Shares of mobile operator Vodafone Group (VOD)(UK:VOD) lost 1.9% following recent
strong gains for the defensive stock. The firm said fiscal third-quarter revenue
rose 15.8% to 9.2 billion pounds ($18.3 billion), or a rise of 4.4% on a
comparable basis, when excluding acquisitions and currency movements. Revenue was
driven by acquisitions in India and Turkey. See Vodafone story.
Click for Detail

AstraZeneca (UK:AZN)(AZN) declined 1.2%, as Britain’s second-largest drugmaker
said its fourth-quarter dropped 12%.

Oil giant Royal Dutch Shell
(RDS.A)(UK:RDSA)Click for Detail
fell 1.7%, after reporting earnings growth that was worse than analysts had
predicted, due to rising costs and falling margins and production. See Shell
story.

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