U.K. Stocks Decline; Royal Bank and Barclays Lead the Retreat

By Sarah Thompson

Sept. 10 (Bloomberg) -- U.K. stocks fell for a second day, led by Royal Bank of Scotland Group Plc and Barclays Plc, as investors speculated Lehman Brothers Holdings Inc. might report more losses and writedowns today.

Old Mutual Plc dropped 4.3 percent after South Africa's biggest insurer said it will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac.

The FTSE 100 Index retreated 22.8, or 0.4 percent, to 5,392.8 at 9:01 a.m. in London. The FTSE All-Share Index lost 0.5 percent while Ireland's ISEQ Index decreased 1.7 percent.

The U.K. economy is contracting for the first time in at least a decade, the National Institute for Economic and Social Research said.

Gross domestic product dropped 0.2 percent in the June to August period and fell 0.1 percent in the three months through July, the group, whose clients include the Bank of England and the U.K. Treasury, said in an e-mailed statement today.

RBS, the U.K.'s second-biggest bank, dropped 2.5 percent to 242.75 pence. Barclays, the third-largest, decreased 2.1 percent to 358.

Lehman, the fourth-largest U.S. securities firm, will report third-quarter financial results today at about 7:30 a.m. in New York, a week earlier than planned.

The bank, which plunged 45 percent in New York trading yesterday, has been trying to raise capital and shed devalued real-estate assets that saddled the company with $8.2 billion in writedowns and credit losses in the past year. Analysts including Merrill Lynch & Co.'s Guy Moszkowski predict Lehman will report more writedowns and losses today.

Old Mutual decreased 4.3 percent to 96.6 pence. The company will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac and increase reserves by $155 million for guarantees on policies in the U.S. The company will set aside $250 million to support its operation in Bermuda, it said.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.

U.K. companies:

EasyJet Plc (EZJ LN) lost 13 pence, or 3.5 percent, to 362.5. Europe's second-biggest discount airline had its share rating downgraded by UBS AG, which said gains in the stock don't reflect challenges it faces next year.

Just Retirement Plc (JR/ LN) fell 0.5 pence, or 0.4 percent, to 119. The U.K. life insurer for retired workers said full-year profit declined 60 percent as it paid out more in claims.

Kesa Electricals Plc (KESA LN) plunged 13.15 pence, or 8.5 percent, to 141.25. The owner of Darty electronics shops in France and the U.K. Comet chain said first-quarter sales dropped after higher living costs hurt demand for flat-screen televisions and laptop computers.

Next Plc (NXT LN) decreased 52 pence, or 4.6 percent, to 1,091. The U.K.'s second-largest clothes retailer said first-half profit fell 13 percent as higher living costs left Britons with less to spend on fashions.

RAB Capital Plc (RAB LN) dropped 3.75 pence, or 13 percent, to 25.5. The London-based hedge fund manager is proposing to freeze client redemptions on its special situations investments and cutting fees on the pools.

RSA Insurance Group Plc (RSA LN) slipped 6.9 pence, or 4.3 percent, to 155.4. The U.K.'s second-largest non-life insurer was cut to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which said M&A is ``unlikely at current levels.''

Thorntons Plc (THT LN) gained 3 pence, or 2.7 percent, to 115. The U.K. chocolate maker founded in 1911 said full-year profit rose 15 percent on commercial sales.

Town Centre Securities Plc (TCSC LN) lost 2.5 pence, or 1.2 percent, to 199.5. The U.K. real estate company reported a full- year loss of 11.2 million pounds from a 0.5 million pound profit and said it is facing ``very challenging times.''

Irish companies:

Ryanair Holdings Plc (RYA ID) decreased 7 cents, or 2.5 percent, to 2.73 euros. Europe's biggest discount airline postponed the opening of its Edinburgh base after a strike by Boeing Co. machinists delayed the delivery of planes.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.