Banks boost FTSE

Barclays and Lloyds TSB shares rallied today amid speculation that directors at the two firms will announce higher dividend payments this week.

The potential increases offered a signal to investors that the banks feel they have emerged from the worst of the sub-prime crisis.

The whole of the banking sector rose by more than 3%, with the FTSE 100 Index 103.4 points higher at 5891 by mid-morning.

The nationalisation of Northern Rock was also seen as a positive factor, with the possible closure of the stricken bank to new business expected to reduce competition in the UK mortgage market.

Barclays led the risers board with a gain of 6% or 26p to 453.5p, while Lloyds TSB added 17.25p to 413p and Halifax Bank of Scotland cheered 25.5p to 634p.

Alliance & Leicester recovered from a weak start to gain 8p to 533p.

Bradford & Bingley also steadied after its shares fell heavily last week in the wake of disappointing results. Shares were up 1.25p at 177.5p.

Housebuilders also received a confidence boost after figures showed house prices surged ahead by 3.2% during the past month as the market enjoyed an exaggerated seasonal bounce. Persimmon rose 22.5p to 724p, while Barratt Developments added 23.5p to 392.5p, a gain of 6%.

Elsewhere, shares in credit information firm Experian rose after it said it had begun looking at the future ownership of comparison service PriceGrabber.com. Shares rose 14p to 457p, while FTSE 250 comparison firm Moneysupermarket jumped 10% or 10.25p to 122p. Analysts said the potential reduction of competition in the mortgage market may also help the firm.

Shares in Speedy Hire also rose after the tool company gave a positive assessment on trading since Christmas. The stock climbed 55p to 836.5p, a gain of almost 7%.