Citi warns of a grim night out at the pub for years

Citigroup says there is little prospect of things improving for the landlord of your friendly local in 2009. In fact, it reckons trading conditions are likely to continue deteriorating. "We believe the proximity to restrictive cash flow tests means shareholders may have no rights on some cash flows for years if trading deteriorates, even if a covenant breach is averted," it said.

Citigroup has chosen to downgrade Punch Taverns, down 10¼p at 66p, from hold to sell and slashed its price target from 200p to 60p. It has cut its target on Enterprise Inns, 1½p off at 66p, from 220p to 90p, Greene King, 11¾p better at 480¾p, from 625p to 525p and Mitchells & Butlers, unmoved on 182¼p, from 275p to 225p, but continues to rate all three a buy. RBS has dropped its rating on Punch from buy to hold because of its high level of debt.

Over the weekend, Tim Martin, chairman and founder of the JD Wetherspoon pubs chain, up 5¼p at 316¾p, complained that private equity com­pan­ies had ­saddled some of the pub chains they owned with too much debt.

Share prices generally drifted off after an early mark-up. But trading conditions remained desperately thin with the FTSE 100 index left nursing a loss of 31.3 at 4417.2.

Banks were marked higher. The open offer for Lloyds TSB, 9.4p better at 140.9p, was only marginally taken up by shareholders and means the bulk of the shares will be left with taxpayers.

The Treasury will own more than half of the enlarged mortgage provider once the merger with HBOS is completed. Royal Bank of Scotland, up 3p at 56.1p, is already almost 60% owned by the Government after it took up the unwanted shares issued as part of its refinancing package. Shore Capital continues to rate both Lloyds and HBOS as buys.

There were also gains for Barclays, up 7.4p at 186.4p, HSBC, 7¾p better at 636¼p, and Standard Chartered, 5p firmer at 870½p.

Shares in the London Stock Exchange firmed 2½p to 570½p. This was in spite of Chi-X Europe, the electronic market launched in 2007 to compete with European stock exchanges, warning that fourth-quarter trading volume dropped 7% in the wake of recent financial-market turmoil.

Share volume declined to 24.8 billion from the previous quarter, while the total number of trades rose 12% to 29.4 million.

Chi-X has the largest market share in Europe among alternative trading platforms Turquoise, Nasdaq OMX Group and Bats Trading. It is backed by a consortium of investment banks, led by Goldman Sachs.

Last week, the LSE reported that the total number of trades on the equity order book reached 263 million, an increase of 25% on 2007. The year recorded 84 of the 100 busiest days on the LSE, with the total number of trades in London alone exceeding

1 million on 23 occasions. Across the group's equity order books the average daily number of trades grew 24% to 1,038,327. But the average daily value traded fell 49% to £5.6 billion, while the average daily number of trades across the group was down 10% at 772,246.

New Star Asset Management firmed 1.07p to 4p after confirming it had received a number of bid approaches. One of the offers is thought to have come from rival fund manager Schroders, down 29p to 832p, which it thought to be ready to offer £100 million. High level of debts has seen New Star's share price plunge from a peak of 485p since July 2007.

Investec Securities has cut its rating on bus and train operators Arriva, 3½p lighter at 586p, and Go-Ahead, 4p better at 1160p, from hold to sell. It says Arriva is vulnerable to further profit downgrades while Go-Ahead may be un­successful in its attempt to extend its Southern rail franchise which is up for tender.