Market Report: Ads downturn threatens 'overvalued' ITV

Shares in ITV closed down 5.51 per cent, or 1.75p, at 30p last night after a leading broker questioned its valuation relative to other broadcasters.

Merrill Lynch said that the pace of the decline in advertising revenue, which could be down 18 per cent in January for ITV1, offset any positives in support of the network's share price.

"Following our series of downgrades, the stock is at a significant premium versus our universe of media stock," Merrill said. "We don't see how this can be justified."

Further sharp falls in advertising "could leave profits so poor that a cut in programming becomes unavoidable", the broker added. Its assessment overshadowed the industry regulator Ofcom's proposals for broadcasters, which was seen as positive for ITV.

Merrill also sullied sentiment surrounding the regional newspaper publisher Johnston Press, which fell by 21.69 per cent, or 2.11p, to 7.62p after the broker lowered its target price from 19p to 13p.

Overall, the FTSE 100 was down 31.52 points at 4,059.88 while the FTSE 250 closed up 17.44 points at 6,159.5.

The banking sector remained the main talking point, with Barclays' share price falling for a seventh consecutive day. It lost 9.33 per cent, or 6.8p, to close at 66.1p. At one point, Barclays was down 25.6p at 47.3p amid concern that it might need fresh capital to bolster its balance sheet as the economic situation deteriorates and its bad debts increase.

Late rumours that the bank's Middle Eastern backers were in the market to raise their stake in a bid to prop up the share price failed to lift the stock off the bottom of the Footsie loser board. In the wider sector, Lloyds Banking Group just managed to stay afloat, up 0.3p at 45.1p, as investors remained cautious. One analyst warned that the FSA's recent announcement of a change in capital risk-weighted assets would "give the markets a false impression of strengthened capital adequacy rations while also removing visibility in the calculation of those ratios".

Sandy Chen, a banking analyst at Panmure Gordon, said the move might prove "counterproductive", adding: "The bald truth is that neither the Government guarantee and insurance programmes, nor the loosened capital adequacy standards, will stop the rise in bankruptcies and unemployment that are dragging the economy further into recession, nor were they designed to do so. They will simply hide the true extent of the potential losses and capital strains that banks are facing." On the upside, Royal Bank of Scotland gained 2.2p to close at 12.5p. Although it was a surge of 21.36 per cent, RBS shares were worth more than 50p only two weeks ago.

Analysts at Goldman Sachs pointed out that, although RBS had raised £32bn of common equity, its tangible book value per share had decreased by 60 per cent and its share count had increased by a factor of five over the past year, the stock was unlikely to recover from its current depressed valuation "until investors get visibility on possible future dilutive capital increases and/a full nationalisation".

Elsewhere, the mining group Kazakhmys rose by 4 per cent, or 7.95p, to 206.75p after UBS moved the stock from "sell" to "neutral". Positive broker sentiment also lifted Anglo-American, which was 9p higher at 1315p after Goldman raised its target price from 1421p to 1485p. Property groups rebounded despite another warning on capital requirements.

JP Morgan said its analysis of the UK's commercial investment market suggested a capital shortage of "at least £50bn", adding: "On a conservative estimate, the stocks need at least £625m to avoid covenant breach. Hammerson and Liberty International need to take action most urgently, likely in the first quarter of 2009.

"But £4.2bn would be needed to bring loan-to-value into a comfort zone of 50 per cent. In this scenario, Liberty International would need to issue new equity equal to 77 per cent of [its] market capitalisation."

The assessment followed a warning from Credit Suisse, which had undermined the sector on Tuesday. As a result, bargain-hunters lifted the stocks and Hammerson closed up 13.25p at 423.25p, while Liberty remained firm at 428.5p, up 3.5p.

On the second tier, the transport group National Express, which was rumoured earlier this week to be the focus of a possible break-up bid by shareholder Jorge Cosmen, fell back 5.05 per cent, or 20.25p, to 381p after Citigroup moved the stock from "buy" to "hold" in a review of the sector. "Volume and yield growth has been exceptional in recent years but some franchises, particularly those recently let, look vulnerable to a severe UK downturn due to adverse movements in contractual subsidy," the broker said.

Among smaller companies, Midas Capital's shares halved in value, from 34p to 17p, after the company said it was in talks with lenders about a temporary waiver of its covenants until the end of April as it seeks to restructure its borrowing arrangements.

Start your day with The Independent, sign up for daily news emails
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before