U.K., Irish Stocks Decline; BT Group, Diageo, Irish Banks Drop

By Adam Haigh

Feb. 12 (Bloomberg) -- U.K. stocks fell as earnings at BT Group Plc and Diageo Plc disappointed investors and concern grew that U.S. initiatives to revamp the economy may have limited impact.

BT Group, the U.K.’s largest phone company, dropped 8.2 percent after reporting a 32 percent slide in third-quarter operating profit and saying it may need to book further charges to overhaul it global services division. Diageo, the world’s biggest liquor maker, retreated 5 percent as it cut its full-year profit forecast.

Bank of Ireland Plc and Allied Irish Banks Plc retreated at least 6.7 percent after the Irish government said it will invest 7 billion euros ($9 billion) in the lenders.

The benchmark FTSE 100 Index lost 40.19 points, or 1 percent, to 4,194.07 at 12:18 p.m. in London and the FTSE All- Share Index slid 0.9 percent. Ireland’s ISEQ Index slipped 1.3 percent.

“Diageo has been hit by the management’s outlook comments and BT investors still see concerns with global services,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers in London. “Overhanging the market is the lack of detail in the U.S. bailout plan and we will need more before we can see any sort of turnaround in sentiment.”

The FTSE 100 Index has lost 2.5 percent this week. The index climbed 5.6 percent in the first week of this month on optimism that measures by U.S. President Barack Obama and interest-rate cuts would help lift economies in the U.S., Europe and Japan out of recession.

BT Group lost 8.2 percent to 96 pence, the lowest since at least 1986. The company said it may need to book further charges to overhaul the global services division.

Diageo Declines

Diageo lost 5 percent to 862.5 pence as contracting economies from the U.S. to Spain weigh on sales of Johnnie Walker whisky and Smirnoff vodka.

Commodity stocks were led lower by Anglo American Plc and BHP Billiton Ltd. as copper, lead and nickel prices in London declined.

Anglo American, the fourth largest diversified mining company, slid 4.6 percent to 1,314 pence. BHP, the world’s biggest mining producer, dropped 3.3 percent to 1,251 pence.

In Ireland, banks shares slumped after the government said it is pumping 7 billion-euro to recapitalize Bank of Ireland and Allied Irish Banks. Prime Minister Brian Cowen is propping up the two lenders as they face rising losses on loans to property developers.

The government will put 3.5 billion euros into each bank and get warrants giving it an option to buy a 25 percent stake in the lenders, the Finance Ministry in Dublin said late yesterday. The two banks said they “welcomed” the decision.

Bank of Ireland fell 6.7 percent to 57 cents. The country’s biggest lender by assets today said it will post a loss in the fiscal second half. Allied Irish Banks, the biggest bank by market value, lost 14 percent to 93.3 cents.

To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net