U.K. Stocks Advance, Led by Banks; HBOS, Lloyds TSB Shares Gain

By Sarah Jones

Oct. 1 (Bloomberg) -- U.K. stocks rose for a second day, led by banks on speculation Lloyds TSB Group Plc's takeover of HBOS Plc will proceed and U.S. lawmakers will push through a $700 billion plan to rescue banks.

HBOS, Britain's largest mortgage lender, jumped 24 percent, while Lloyds TSB gained 10 percent after Prime Minister Gordon Brown said he's confident that the takeover will go through. British Airways Plc climbed as oil retreated. Lonmin Plc limiting gains after Xstrata Plc scrapped a 5 billion-pound ($8.9 billion) hostile bid for the platinum producer.

The benchmark FTSE 100 index climbed 57.14, or 1.2 percent, to 4,959.59 in London. The FTSE All-Share Index added 1.1 percent. Ireland's ISEQ Index advanced 2.6 percent.

``The FTSE has received a shot in the arm thanks to a 25 percent hike in HBOS' shares after Gordon Brown's statement of confidence,'' said Tim Hughes, head of sales trading at IG Index in London. ``There is also renewed hope that the Senate and then the House of Representatives will finally push through a revised $700 billion deal.''

The FTSE 100 dropped 13 percent last month as bank bailouts worldwide accelerated and as the proposed bailout plan to rescue U.S. financials stalled in congress.

HBOS, Britain's largest mortgage lender, which agreed to be bought by Lloyds TSB in an all-share deal, surged 24 percent to 148.10 pence, rebounding from a three-day sell off.

`Confident'

Prime Minister Gordon Brown said he was ``confident'' the deal would proceed. The stock had fallen 33 percent in the three days through yesterday amid speculation the share-swap may not go ahead on the terms set on Sept. 17 as financial market turmoil trimmed the value of the Edinburg-based lender.

Lloyds TSB shares gained 10 percent to 250 pence. Barclays Plc, the U.K.'s second-biggest bank, gained 4.4 percent to 341 pence.

The U.S. Senate, which tied a revived plan to an increase in bank-deposit-insurance limits and tax breaks to win support from Republicans, set a vote for tonight on the bailout plan.

Irish financials advanced for a second day, led by Anglo Irish Bank Corp. Plc, as parliament in Dublin debated a plan to guarantee the deposits and borrowing of six lenders.

Anglo Irish, the country's third-biggest lender, gained 8 percent to 4.15 euros. Allied Irish Banks Plc, the biggest by market value, advanced 1.7 percent to 6.00 euros and Bank of Ireland Plc rose 8.9 percent to 4.30 euros.

BA

British Airways, Europe's third-largest airline, increased 3.2 percent to 173.5 pence. Carnival Corp., the world's biggest cruise-line company, advanced 2.3 percent to 1,699 pence. TUI Travel Plc, Europe's largest tourism company, increased 3.6 percent to 223.25 pence.

Crude oil fell below $100 on speculation the U.S. economy will slip into a recession, curbing fuel demand in the world's biggest energy consuming country.

Lonmin shares dropped 20 percent to 1,813 pence as Xstrata raised its stake in the world's third-biggest platinum producer to 25 percent to try and block other bidders from gaining control.

Xstrata spent 440 million pounds today to buy 4.2 percent of Lonmin at an average 1,979 pence a share. It earlier scrapped a planned hostile bid at 3,300 pence as ``extreme'' financial- market turmoil prompted concern over funding the deal.

The shares lost 1.9 percent to 1,683 pence.

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

Cadbury Plc (CBRY LN) lost 8.5 pence, or 1.5 percent, to 557. The world's largest confectioner said Chief Financial Officer Ken Hanna has decided to step down in April after spending five years with the company and helping spin off the Dr Pepper U.S. drink unit.

Punch Taverns Plc (PUB LN) jumped 25.5 pence, or 19 percent, to 160.5 after the U.K.'s largest pub owner said it will offer to buy back 93.5 million pounds of bonds, boosting the shares as concern eased about the company's ability to repay debt.

Shanks Group Plc (SKS LN) jumped 8 pence, or 4.2 percent, to 198 after the British waste-disposal company with operations in Belgium and the Netherlands said first-half performance may beat its expectations because of buoyant business conditions and a strong euro.

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