Market Report: TSB takes its turn under the spotlight

Banks continued to fascinate investors yesterday. As shares stretched to yet another peak, attention was suddenly directed at TSB Group, for long regarded as vulnerable to a hostile takeover strike.

In a hectic burst of trading the shares shot ahead 12p to 187p, their best-ever level. Profit-taking cut the gain to 8p by the close.

Many stock market operators are convinced TSB is near to surrendering its independence to Lloyds Bank. But the 'Black Horse' bank is not the only candidate. There is persistent talk of overseas action, with the French Credit Lyonnais in the frame.

Any bidder could, however, be reluctant to take on Hill Samuel, TSB's unsatisfactory merchant bank investment. There has been talk of a management buyout although such a move has been denied.

Lloyds would almost certainly seek to sell Hill Samuel. It is attracted by TSB's branch network, particularly in Scotland, where it is thin on the ground. Lloyds could also reap huge reorganisation benefits merging the rest of its UK network with the TSB spread.

Barclays, after Thursday's drubbing, was again heavily traded, but buyers easily outscored sellers. It appeared that some institutions decided to switch out of National Westminster. Their action lifted Barclays 16p to 408p and cut NatWest 7p to 437p.

The rest of the market had an active session with the second- liners and fringe shares attracting much of the attention. More than two-thirds of the day's turnover was in non-blue-chip shares, with one securities house said to have conducted a programme in second-liners.

Despite the reduced interest in blue chips, the top index, the FT-SE 100, hit a new peak, up 17.3 points at 2,922.1, with the surprise, if modest, cut in German interest rates helping sentiment. Utilities were among the strongest performing leaders, with dividend yield considerations again the most significant influence.

The FT-SE 250 index, reflecting the activity in second liners, gained 20 to 3,107.9, also a peak.

Food retailers were strong on the conviction that the imposition of VAT on food will not be one of the Chancellor's Budget measures. Argyll Group, with the added support of a Barclays de Zoete Wedd presentation, gained 13p to 381p. J Sainsbury rose 11p to 534p.

The Wm Morrison supermarket group continued to intrigue, with one securities house thought to be short of stock. At one time the shares rose 5p to 174p. They closed at 171p.

Airtours, battling to win the struggle for its rival holiday operator, Owners Abroad, was at one time 16p higher at 330p, with Hoare Govett apparently leading the buying. The shares closed at 327.5p.

Behind the interest was the belief that if, as many expect, Airtours emerges victorious, the new enlarged group, capitalised at more than pounds 600m, will be an irresistible investment for many institutions which, in the past, have tended to ignore the two groups because of their size. Owners rose 5p to 144p in the Airtours slipstream.

British Petroleum managed a 2p gain to 290p on its North Sea oil find which BZW calculates as being worth an additional 8p a share. Aran Energy, also seen as a beneficiary, rose 2p to 27.5p.

British Airways dipped 3p to 290p as James Capel moved from buy to hold, and a US report suggested airline returns could decline for most of the next two decades.

Union Discount tumbled 19p to 84p as long-running takeover talks were called off. First National Finance Corporation gave further ground on its refinancing set-back. The shares lost 5p to 56p, a fall of 21p since the problem was disclosed on Thursday.

Peel Holdings advanced 31p to 200p as its 80 per cent subsidiary, Manchester Ship Canal, at last obtained planning permission for a shopping development at Dumplington, near Manchester. MSC jumped pounds 3.50 to pounds 20.

Rolls-Royce rose 4p to 134p. NatWest Securities believes the shares are a recovery buy. Next week's profits are expected to be pounds 55m against pounds 51m. Cookson Group, on its rights issue, fell 1p to 199p. Gold shares sparkled, reflecting buying in South Africa. Vaal Reefs added pounds 1.50p to more than pounds 26.

Boddington Group, the drink wholesaling and pub group, added 12p to 242p, still drawing strength from its sharp profit advance. BZW lifted its profit forecast for this year form pounds 27m to pounds 28.4m.

JA Devenish fell 4p to 264p on worries Boddies will place its near 20 per cent interest.

WMS, a Leeds-based distributor of architectural fittings, is expected to join the stock market next month. The issue is the fourth currently under way from Panmure Gordon. WSM, initially due to float last November, is expected to be valued at about pounds 60m. The company sources most of its products from the Far East and made pre-tax profits of about pounds 5m last year.

Nurdin & Peacock had another active session with stories circulating of a 250p-a-share offer from SHV, the Dutch investment group. A 1 million share trade on Thursday, above the then market price, spurred the excitement and at one time yesterday shares of the cash and carry group were up 21p, closing 17p higher at 213p. SHV owns the Makro cash and carry chain.

Rutland Trust, a financial group, was the most actively traded share yesterday as Forsakringbolaget SPP, a Swedish group, placed a 35.2 per cent stake at 17p through UBS Phillips & Drew. The Swedes inherited their interest when they took over London & Edinburgh Trust. A French group sold 4.77 per cent. Despite the sales Rutland shares rose 2p to 20p.