MARKET REPORT : Bank of Scotland takeover target draws new queues

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The Independent Online
Two long-standing bank favourites are intriguing the stock market. Although the sheer exuberance of recent weeks seems to be seeping from many financial shares, Bank of Scotland and Standard Chartered are displaying surprising strength. BoS rose 11p to 440.5p, a peak; Standard put on 22p to 1,001p.

The banking twosome is no stranger to take over speculation. BoS has been linked with a host of would-be bidders. Eleven years ago Standard was forced into one of the fiercest banking battles when, with the help of the so-called White Squires, it beat off the attentions of Lloyds TSB.

The Scottish bank has looked particularly vulnerable since its long-time protector, Standard Life insurance group, sold most of its 32 per cent stake last year. The insurer had held the shares for 11 years, buying from Barclays.

The market is convinced an important financial deal is being hatched. BoS, paying pounds 90m for EFT, an asset management company, is seen as a likely candidate and it could be significant its shares, in brisk trading, moved to a peak on a day many bankers were content to remain quietly in their parlours.

Standard is seen as an overseas target. But HSBC, seeking acquisitions, could be interested. It is expected to eventually cut its 61 per cent stake in the Hang Seng Bank of Hong Kong following the Chinese takeover. Standard, with a Hong Kong presence, could fill any gap. HSBC rose 40p to 2,104.5p.

The former building societies that converted to banks were ruffled by J Sainsbury's venture into mortgages. The superstores chain has linked with Standard Life for its loan push.

So on a day Nationwide decided, at least for the time being, to stay a mutual, Abbey National, the first to convert, suffered a 15p fall to 821.5p; Halifax, after a 7.5p gain, had to settle for a 1p fall at 727.5p and Woolwich dipped 2p to 287p. Alliance & Leicester bucked the trend with a 2.5p gain to 600.5p.

The rest of the market ended with modest gains. Early euphoria, following New York's overnight surge, quickly evaporated. After achieving a mid- morning -points gain it was all downhill and Footsie ended with a 27.8 rise to 4,874.5p.

Higher-than-expected June retail sales, strengthening the possibility of another interest rate increase, created the caution.

Tate & Lyle, the sugar group, was another to surrender an early gain. The shares were up 6.5p as a story went round that cash-rich Associated British Foods was preparing to strike. But monopoly considerations make the possibility of such a deal remote. Tate fell back to 429p, up 0.5p, while ABF rose 13p to 571.5p.

Beers produced a few gains but Greene King's progress to a peak of 762p owed more to its growing retail spread than brewing.

Since rolling out impressive interim figures last month the shares have climbed 115p, as the market has warmed to the success of its Magic Pubs Co. The pubs chain, which cost pounds 197.5m, was responsible for much of the 49 per cent profits increase.

Despite more profit downgradings British Airways climbed 7p to 635p. UBS cut from pounds 740m to pounds 580m.

Shield Diagnostic was another which lost early exuberance. At one time the shares were up 40p on its long-awaited deal with Abbott Laboratories. At the close the price was down 17.5p at 550p. Biocompatibles International was another healthcare group to give up gains.

It ended 8.5p lower at 997.5p following a further delay in its licensing talks with Johnson & Johnson, the US giant. Last month the shares were around 1,400p.

Two newcomers made firm starts. Kingfisher Leisure, a theme bar business, finished at 173.5p from a 160p placing and Citadel, a property company focusing on French offices, went to 106.5p from a 100p placing.

Ramco Energy, putting JKX Oil & Gas out of its misery, gained 30p to 1,187.5p. JKX, floated at 190p, rose 3p to 47.5p.

Colleagues, the junk mail business, hardened 16p to 93.5p as a Canadian group, Moore Corporation, made the signalled bid - at 95p. Another cash bid, a 75p affair from Britannia, lifted British Building & Engineering 15.5p to 70.5p.

Pace Micro Systems produced more trading disappointment, falling 9.5p to 53.5p.

Total Systems, the computer concern, gained 6p to 68.5p. MMT Computing has nudged its stake to 5.62 per cent but Total said it was not involved in takeover talks.

Taking Stock

rJulie Ramshaw, the Morgan Stanley analyst who backed Next when it was in the dumps, is still a fan of the group. After a spell at Laura Ashley she recently returned to Morgan Stanley and yesterday let it be known she has put a 12-month 850p target on the shares.

She expects profits this year to reach pounds 191m against pounds 158.8m. Ms Ramshaw first put her faith in Next when the shares were in the penny dreadful category. They are now 732p compared to 13p in 1990.

rSpargo Consulting, the computer services group, nudged interim profits up to pounds 625,000 and with trading running at record levels is set to top the market's pounds 1.45m year's forecast.

The shares rose 2.5p to 114.5p; they were 174.5p earlier this year.