Market Report: Lloyds Bank is pulled down by the Max factor

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The Independent Online
LLOYDS BANK came under stock market pressure yesterday over its exposure to Maxwell companies.

As the investment house County NatWest fretted about the extent of the bank's Maxwell-related losses the shares tumbled 21p to 431p, a two-day fall of 35p.

And Lloyds failed to join in a late rally based on hopes of lower German interest rates.

John Aitken, County's banking analyst, believes Lloyds may be forced to make much bigger provisions against its Maxwell loans than many in the market suspect.

The bank holds just under 50 per cent of Maxwell Communication Corporation, valued at pounds 721m last year and now thought to be worthless. Lloyds has probably schemed in a pounds 100m to pounds 150m provision but may find it will have to provide up to a further pounds 200m.

Profit forecasts for the Black Horse bank hover near pounds 800m. They could turn out to be over-optimistic, Mr Aitken believes.

But Lloyds, where at least one other securities house is preparing a sell recommendation, was not the only bank under pressure. Barclays fell 11p to 351p and Standard Chartered lost 12p to 455p.

Carr Kitcat & Aitken believes Standard, which has so far collected court awards this year of pounds 263m and has almost certainly over-provided against the Indian securities scandal, is now 'reasonably valued'.

TSB Group, where profit forecasts have been savagely reduced, managed a 1p gain to 133p.

For much of the session shares were subdued, with the FT-SE index at one time down 28.5 points. Then hopes that the Germans would make a significant interest rate cut at Friday's Bundesbank meeting gathered strength, and after swinging to an 8.6-point gain the index ended 5.5 higher at 2,565.5.

Futures activity fuelled the revival. Keen buying by a continental bank, which has apparently achieved a reputation for successfully predicting Bundesbank decisions, convinced many that a German cut was likely.

With sterling putting on a firmer display, a German reduction would clearly make it much easier for the Chancellor to make another 1-point base rate cut ahead of the Tory party conference.

Drug shares, which have wilted under US influences, staged a strong recovery. Glaxo Holdings rose 18p to 764p, SmithKline Beecham 19p to 492p and Wellcome 11p to 920p.

SmithKline was helped by Monday's US Food and Drug Administration meeting at which its anti-depressant drug is high on the agenda.

In early trading another array of profit downgrades rocked prices. Grand Metropolitan, weak on Monday as Barclays de Zoete Wedd cut its estimate to pounds 930m against the pounds 950m achieved last year, was at one time down 19p at 404p with Nikko reducing to pounds 925m. The shares ended 9.5p down at 413.5.p

Imperial Chemical Industries, hit by Hoare Govett on Monday, retreated 16p to 1,129p.

Hepworth, the building materials group, tumbled 40p to 243p as James Capel lowered this year's forecast from pounds 54m to pounds 44m and next from pounds 60m to pounds 48m.

BZW's 'take profits' advice took the steam out of English China Clays, down 19p to 425p.

British Steel was dumped 3p to 58p. Smith New Court lowered its estimates, saying devaluation benefits would be short-lived. It has swung from a pounds 25m profit to pounds 50m loss for this year and from a pounds 75m profit to break-even for next.

SNC left Trafalgar House 3p lower at 55p. It forecast profits of pounds 100m with a token final dividend, making 4.5p.

A presentation at Kleinwort Benson left Courtaulds 10p lower at 488p. A British Aerospace meeting with analysts put 2p on the shares at 118p.

Kwik Save, the supermarket chain, was ruffled by an agency cross of 1.5 million shares at 660p. At one time the price was down to the cross level, but it closed 12p off at 672p.

Clarke Foods, the ice-cream group talking to its bankers, was at one time down 5p at 8p. The shares closed at 10p. Sears, despite its losses and dividend cut, pushed aside early weakness to end 8p higher at 80p.

Enterprise Oil, following its US share listing application, gained 14p to 426p as American buyers anticipated the event.

The music group Boosey & Hawkes sounded a discordant note, down 95p to 865p, on its figures. Speyhawk, the hard- pressed property group, fell 1.5p to 10.5p as its finance director moved to the Kingfisher property off-shoot.

Shares produced a sharp about-turn yesterday. The FT-SE share index, at one time down 28.5 points, ended 5.5 up at 2,565.5. The FT 30 rose 3.5 points to 1,876.6. Trading volume reached 533.8 million shares. Government stocks were mainly lower.

Ferment at Hoskins Brewery, the small Leicester business, is getting stronger. Expect a move soon by Richard Cattermole, who runs Ryan Elizabeth Holdings, to seize boardroom control. He has 4.9 per cent and his stockbroker, Dennis Bailey of Hichens Harrison, has 8.5 per cent. They are unhappy about Hoskins' trading performance. Its shares held at 41p.

Brierley Investments says it has found the saviour for Gibbs Mew, the small brewer and pub operator based in Wiltshire, that it is bidding 200p per share for. David Stephen, formerly of Whitbread and Home Brewery, will become managing director if the pounds 11m takeover succeeds. Gibbs, which said the announcement was 'as bizarre as the bid', held at 188p.

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