Banking sector hopes aid FTSE recovery

Hopes of relief for the struggling banking sector put the London market on the front foot today.

Reports that the Bank of England could swap the mortgage-backed bonds on lenders’ balance sheets for less risky British government bonds saw gains across the sector.

The stocks were also helped by overnight advances for the likes of JP Morgan and Citigroup ahead of a slew of first-quarter results from US investment banks. The wider FTSE 100 Index was 32.3 points ahead at 5939.2 by mid morning.

Among UK banks, Alliance & Leicester – seen as one of the banks most vulnerable to the crunch – gained almost 4% or 18.5p to 490p. It was closely followed by Royal Bank of Scotland, which gained 12.35p to 360.75p.

Barclays also rose 14p to 463p and Halifax Bank of Scotland cheered 17p to 531.5p following the Financial Times report, although results from JP Morgan later today will be a key factor in determining sentiment.

The leading Footsie riser, however, was credit checking group Experian, which gained almost 9% or 30.75p to 386.5p after beating City expectations with second half sales figures.

But Legal & General led the fallers’ board after the insurer warned of a tougher outlook for 2008 as a cooling housing market hits its protection business. This sent the shares more than 4%, or 6p, lower to 124.9p.

Other companies on the back foot included rival Friends Provident, as investors continued to desert the stock on fading hopes of an offer from private equity suitor JC Flowers. Friends was off 1.9p to 117p.

Elsewhere sportswear retailer JJB Sports shares fell almost 3% after the struggling firm said it planned to shut 72 stores, costing 800 jobs. Bottom-line profits including the closure costs fell 72% to £10.8 million, sending JJB 3p lower to 110.75p.