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Lloyds revives bank stocks
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July 30, 1999: 10:04 a.m. ET
16% jump in pretax profit inspires buying for rest of U.K. bank sector
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LONDON (CNNfn) - Lloyds TSB breathed life back into the U.K. banking sector Friday, when it announced better-than-expected first-half earnings.
Lloyds stock jumped 2 percent to 805 pence, driving a rebound across the U.K.-listed bank stocks, which have been suffering recently.
Investors' appetite for more deals was whetted, after Lloyds posted a 16 percent rise in pretax profit before one-time items to 1.853 billion pounds ($3 billion) for the six months to June 30. Earnings per share rose 16 percent to 24.2 pence.
Lloyds, the second-most valuable banking stock in London after HSBC, is awaiting clearance on its $11 billion bid for insurer Scottish Widows, but senior management refused to rule out more acquisitions.
"The best bank in the U.K.," commented Neil Baker, Dresdner Kleinwort Benson banking analyst, who added "These are very good results, well above the top of expectations."
He cited the 8 percent increase in revenue and the 2 percent reduction in costs.
"A deal in Europe is a logical move in the longer term," said Baker, although he pointed out that Lloyds' well-regarded management is extremely keen to make sure any acquisition fits its exact investment criteria.
Baker, who recommends buying the shares, said he is likely to upgrade his full-year pretax forecast to around 4 billion pounds. Prior to the half-year earnings he expected 3.7 billion pounds.
Hopes that conditions in the U.K. banking sector are improving drove HSBC (HSBA), Barclays (BARC) and National Westminster (NWB) up to 4 percent higher in London.
Indications that the U.K. mortgage market is growing healthily and consumer credit demand is increasing at between 15 percent and 20 percent fueled hopes of a revival in banking stocks.
Fears of pressure on margins in mortgage lending from new online entrants such as Prudential's (PRU) Egg unit have weakened bank shares in recent weeks. 
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Lloyds TSB
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