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Lloyds Banking Group today continued to be rocked by last week's warning that losses may total £11 billion at its recently acquired HBOS subsidiary.
The shares lost a further 3.8p to 52.6p today and have now fallen more than 80% since the Government pushed through the idea of a merger between Lloyds and HBOS back in the autumn.
The bank has been forced to deny claims that the Government will eventually control a majority stake and yesterday it was stripped of its Aaa status by Moody's, the credit ratings agency.
Now several brokers have chosen to put the boot into the High Street lender. Citigroup has cut its rating on the shares from buy to hold to reflect those record losses at HBOS. It has also slashed its target for the bank from 120p to 65p, while Credit Suisse has lowered its target from 90p to 55p.
The broker says: "Although the Government's asset-protection scheme could provide relief, the scale of potential capital issuance means the balance of risk has adversely shifted."
It has increased its loss per share for the current year from 1.2p to 49.5p and for 2010 from a loss of 8.3p to 24.9p. Royal Bank of Scotland, the other bank contained within the Government's golden circle, firmed 0.1p to 20.5p, while Barclays got its nose in front with a rise of just 0.4p at 97.5p. But HSBC shed 31p to 499½p.
Elsewhere, City investors were forced to fight a rearguard action in order to stop leading shares dropping back below the 4000 support level. The meagre 0.1% drop in the inflation rate to 3% failed to live up to expectations and a sell-off of both the Dow and S&P futures paved the way for opening losses on Wall Street this afternoon. The FTSE 100 index fell 100.17 to 4034.58.
Property shares acted as a drag on the market, with Land Securities dropping 50p to 571½p, Hammerson 28¼p to 359p and British Land 24¾p at 425½p. The sell-off comes at a bad time for both British Land and Hammerson, which are looking to get away sizeable rights issues needed to reduce their growing debts. Land Securities conceded yesterday that it too was looking to tap shareholders.
The selling also spilled over into Brixton, down 13¼p at 53¾p and Segro, down 17¼p at 117½p.
Life assurer Legal & General staged an early rally, with the price touching 50.5p, before seeing its lead reduced 1.7p at 46p as more than 40 million shares changed hands. The rally came after the life assurer moved to reassure the City about the state of its balance sheet by doubling its credit-default reserves on government bonds to £1.2 billion.
The speculators claim L&G was on the verge of tapping shareholders for at least £750 million, or cutting the dividend. As a result, its lost 11% of their value yesterday. Some brokers say the company can avoid a dividend cut, although growth rates may slow.
Not everyone was impressed with L&G's response: Bernstein has responded by cutting its target price from 165p to 85p, while Keefe Bruyette Woods has moved the shares from underperform to market perform despite the poor sales outlook. Charles Stanley keeps the shares at hold, but warns the management has a job on its hands to restore investor confidence. By contrast, rival Aviva fell 13¾p to 303½p.
Satellite broadcaster BSkyB slipped 10p to 453p after JPMorgan cut its target price from 480p to 420p and repeated its underweight rating. It says acquisition costs are likely to offset the benefit of higher margins, net product additions and the return of Sky's basic channels to Virgin Media.
