Optimistic banks cheer FTSE

Financial stocks were driving gains by the London market today after HBOS became the second bank to raise expectations ahead of their annual results.

The owner of Halifax and Bank of Scotland followed the lead of rival Alliance & Leicester last week by revealing that consensus hopes for earnings were too low.

With investors also applauding the intention of HBOS to buy £750m (€1.1m) of its own stock in 2006 on top of the £1bn (€1.5bn) it has spent in the market this year, the FTSE 100 Index advanced 11.8 points to 5522.2 by mid-morning.

HBOS lifted 3% or 26p to 893p and there were strong gains for banks that are yet to update the market on recent trading and could lead to expectations being raised further.

Royal Bank of Scotland gained 35p to 1703p ahead of its pre-close statement on Thursday, while Lloyds TSB was 6.75p stronger at 478p.

Top of the charts was retailer Next as investors took heart from a report by the British Retail Consortium (BRC) that found like-for-like sales were 0.8% higher in November than a year earlier.

Next advanced 5% or 75p to 1530p amid speculation that it might also try to separate its retail and property divisions, while traders believed private equity companies could also be waiting in the wings.

Poker giant PartyGaming was the heaviest faller – off 2p at 115.75p – after rival Empire Online announced that it has begun legal proceedings in Gibraltar against its former ally.

Outside the top flight, traders speculated that Forth Ports could be the next UK ports operator to be targeted by predators as its shares jumped 4% or 56p to 1582p.

Also in the sector, investors in P&O responded favourably to the news last night that Singapore’s Temasek is keeping its options open about a takeover.

P&O shares increased by 13p to 485p – well above the level that Dubai-based DP World has agreed to pay.