Michael Taylor / Reuters
London: The FTSE 100 of Britain’s leading shares fell 0.7% on Friday after mortgage lender Northern Rock pulled banks into negative waters as the credit crisis continued to overshadow markets.
Northern Rock issued a profit warning and was offered an emergency loan from the Bank of England, becoming the biggest British casualty so far of the crisis squeeze which has hit global markets.
The bank’s shares plunged 21.75% to 500 pence as it said it now expected an underlying 2007 pretax profit of 500 to 540 million pounds, compared with analysts’ current consensus forecast of 647 million.
“It does stand alone (but) its appalling risk management,” said one trader. “It’s loan versus deposits are (higher, so) in that respect its a much riskier bank. The rest of the sector gets hammered on this.”
Credit Suisse also cut its price target on Northern Rock to 500 pence from 745 pence.
At 0739 GMT the FTSE 100 was down 46.8 points at 6,317.1 as traders looked to US retail sales data for later in the session for further direction.
“I’m not able to tell you the (interest) rate or the size other than it is clearly substantial,” Northern Rock CEO Adam Applegarth told reporters on a conference call.
Among fellow lenders, Alliance & Leicester, HBOS and Bradford & Bingley all fell.
HSBC Holdings shed 0.3% after a newspaper reported that it is in talks to buy a 49% stake in the life insurance unit of South Korea’s Hana Financial Group, a day after it bought shares in a Vietnamese insurer.
Barclays was 2.4% lower as it prepares to hold a shareholders meeting to approve support for its bid for Dutch rival ABN AMRO.
In commodities, US crude prices rose to about $79 a barrel as a hurricane subsided in the gulf of Mexico, though prices held near the previous day’s record high on supply worries ahead of the peak winter period.
BP dipped 0.2% and rival Royal Dutch Shell was flat.
But higher metal prices boosted miners, with BHP Billiton, Anglo American and Xstrata all trading higher.
Also on the upside, Anglo-Dutch publisher Reed Elsevier climbed 1.4% after positive broker comments, traders said.
Further on the downside, Cadbury Schweppes dipped 0.6% after it turned down a fresh approach from a private equity consortium offering to acquire its drinks arm.
The world’s largest confectionery group turned down the offer from a Blackstone-led group more due to financing than valuation, industry sources said. Cadbury said in March it would separate its Dr Pepper and 7UP unit.
Plumbing products and building materials distributor Wolseley lost 3.2% after Credit Suisse cut its rating to “underperform” from “neutral”.