U.K. Stocks Rise, Led by HBOS on Lloyds Deal; Barclays Advances

By Sarah Jones

Sept. 18 (Bloomberg) -- U.K. stocks rebounded from the steepest three-day drop in six years after Lloyds TSB Group Plc agreed to buy HBOS Plc for 12.2 billion pounds ($22.2 billion). HBOS shares surged 37 percent.

Barclays Plc and Royal Bank of Scotland Group Plc paced the advance as central banks worldwide took coordinated action to ease tensions in financial markets. Kingfisher Plc led retailers higher after earnings topped analysts' estimates and a report showed British retail sales unexpectedly rose last month.

The FTSE 100 Index rose 75.5, or 1.5 percent, to 4,987.9 at 1:12 p.m. in London, rebounding from the biggest three-day drop since July 2002, triggered by the bankruptcy of Lehman Brothers Holdings Inc. The FTSE All-Share Index added 1.7 percent, while Ireland's ISEQ Index gained 1.1 percent as Ryanair Holdings Plc shares rose the most in two weeks.

More than $1.1 trillion has been wiped off the value of U.K. shares this year as banks as losses at financial companies topped $228 billion across Europe, eroding profits.

HBOS surged 51 percent to 222.25 pence, the steepest advance since at least 2001, after Lloyds TSB agreed to buy Britain's largest mortgage lender for 232 pence a share in stock.

For ``HBOS to be acquired by one of the incumbents confirms that these are the most interesting of times,'' UBS AG London- based analyst Alastair Ryan wrote in a note to investors. The deal ``would likely lead to a significantly more profitable sector over the longer term. No bank could reasonably turn down the opportunity to gain such domestic dominance.''

Lloyds TSB climbed 4.8 percent to 293.25 pence.

Barclays, the third-largest U.K. bank, gained 4 percent to 330.5 pence. Royal Bank of Scotland, Britain's second-largest bank, added 7.5 percent to 182.1 pence. Bradford & Bingley Plc jumped 6.9 percent to 31 pence.

$180 Billion

The Federal Reserve, the European Central Bank and the Bank of Japan united with their counterparts around the world including the Bank of England to pump an additional $180 billion into markets facing their worst crisis since the 1920s.

Kingfisher rallied 10 percent to 132.3 pence. Europe's largest home-improvement retailer said pretax profit climbed 23 percent to 217 million pounds before one-time items in the six months ended Aug. 2, beating the 205.5 million-pound median estimate of eight analysts surveyed by Bloomberg. Sales from continuing operations also topped estimates.

DSG International Plc, Europe's second-largest consumer- electronics retailer, surged 12 percent to 58.25 pence. Marks & Spencer Plc, the U.K.'s biggest clothing retailer, added 6.3 percent to 241 pence.

A report today showed British retail sales unexpectedly increased in August for a second month, climbing 1.2 percent, the Office for National Statistics said today in London. Economists forecast a 0.5 percent decline, according to the median of 27 estimates in a Bloomberg News survey.

Ryanair climbed 7.2 percent to 2.74 euros after Europe's biggest discount carrier said it will break even this fiscal year following the recent decline in oil prices. Chief Executive Officer Michael O'Leary scrapped earlier guidance for a result between breakeven and a loss of 60 million euros ($87 million) for the year ending March 31.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.