FTSE down slightly after HBOS revelations

A shock profit warning from Lloyds Banking Group for its HBOS arm sent the stock plummeting today and dragged the banking sector deep into the red once more.

An unexpected alert to a potential £10bn (€11.1bn) annual loss at struggling HBOS saw Lloyds shares fall as much as 40% at one stage.

The wider FTSE 100 Index also plunged into the red after spending most of the day in positive territory, closing down 12.7 points at 4189.6.

Banks had been making strong advances earlier in the day, helping offset concerns after official figures showed output across the 15-nation eurozone fell by a record 1.5% between October and December.

But the news from Lloyds that HBOS's assets had been hit by falling markets and the revelation of a £7bn (€7.8bn) writedown at HBOS's corporate division sent shockwaves through the sector, with Lloyds closing down 29.5p at 61.4p - a fall of 32%.

Royal Bank of Scotland followed close behind, down 9% or 2.2p at 21.8p, while Barclays plunged 4%, off 4.5p to 100.5p.

Insurers also featured high up on the fallers board, led by Legal & General after Deutsche Bank lowered its target price.

The move capped what has been a tough week for the sector after reports they may be forced to raise more capital. L&G slumped another 5.2p to 49.5p.

Among those enjoying better fortunes was Thomas Cook, the leading Footsie riser after a 7% rise - up 15p at 224p - as investors were encouraged by yesterday's trading update.

The firm said losses in the three months to the end of 2008 narrowed by more than half to £27.4m (€30.6m), compared to £53.7m (€60m) the previous year and said it was on track to meet expectations for the current year.

B&Q owner Kingfisher also rose, up 4% after an upgrade from brokers at UBS ahead of its trading update next week. The shares added 5p to 141.7p.

Homebase owner Home Retail Group received a knock-on boost, ahead 8.25p at 229.5p.

Other firms on the front foot included the London Stock Exchange, up 18p to 488p after a successor to long-serving chief executive Clara Furse was announced.

Meanwhile property firm British Land added 4.75p to 4461p, making up ground lost yesterday in the wake of its £740m (€826.9m) rights issue.

Elsewhere struggling sportswear chain JJB Sports lost earlier 4% gains to close down 0.25p at 12p despite assuring it had secured another month of breathing space from its lenders.

And the UK's biggest care home operator, Southern Cross Healthcare, added more than 11% after it said it had cut debt by £23.6m (€26.3m) to £73.9m (€82.6m) since the end of its financial year in September. Shares rose 8.75p to 88p.

The biggest Footsie risers were Thomas Cook up 15p at 224p, Kingfisher ahead 5p at 141.7p, Kazakhmys up 12.5p at 309p and Schroders up 39p at 811p.

The biggest Footsie fallers were Lloyds Banking Group down 29.5p at 61.4p, Legal & General off 5.2p at 49.5p, Royal Bank of Scotland down 2.2p at 21.8p and Tate & Lyle down 14.75p at 322.5p.