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UBS reckons the outlook for the UK banking sector looks significantly rosier than it did at the start of this year. So much so that it expects growth revenues to overshoot consensus forecasts during the next 12 months while bad-debt provisions will undershoot.
UBS has added Lloyds Banking Group, 0.9p better at 93.8p, to its first 11 list, while removing HSBC, 13¼p higher at 707¼p.
The Lloyds share price has come rattling back from its year's high of 111.3p, reached at the end of August, amid mounting speculation that it will be forced to call on shareholders for an extra £15 billion.
Lloyds is 43% owned by the taxpayer and wants to avoid seeing that stake increased when it joins the Government's Asset Protection Scheme.
Dealers also report there has been an increase in the number of short positions held by hedge funds in the shares on the basis that a rights issue will drive the price lower near-term.
Elsewhere in the banking sector, Barclays added 6¾p at 379¼p while Royal Bank of Scotland firmed 0.38p to 47.3p.
This positive performance by the banks, combined with a strong showing from the miners, helped to get the stock market off to a flying start to the week. Once again, the FTSE 100 index was able to claw back Friday's losses and re-establish itself back above the 5200 resistance level with a rise of 68.87 at 5259.11.
Firmer commodity prices were achieved on the back of a weaker dollar and helped drive the miners higher and helped them to recoup some of Friday's losses. Mexican outfit Fresnillo led the way with a rise of 25½p at 848½p after saying that it expected to see the silver price to continue trading around the $17-$18 level for the rest of the year. It was followed by Kazakhmys, up 32p at 1290p, and Vedanta Resources, 63p better at 2375p. Meanwhile, Anglo-Swiss miner Xstrata, which last week dropped its proposed merger with Anglo American, rose 29p to 1017p. Deutsche Bank has resumed coverage of the shares with a buy rating. Anglo American put on 66½p at 2266p.
Oil shares were also in demand as the price of crude nudged to a year's high of $79.05 a barrel on growing hopes of increased demand. BP posted a rise of 12.1p at 571.3p, while Royal Dutch Shell was chased 38p higher to 1844p, and Tullow Oil 22p dearer at 1258p.Little Sound Oil advanced 0.67p to 3.52p in response to Friday's announcement after the close of business on Friday in which the company said it had become the subject of stakebuilding. Since the start of the month, Lynchwood Nominees has increased its holding in Sound from 79.2 million shares to 156.7 million, or 22.6% of the company. The man behind Lynchwood is believed to be Frank Timis, the entrepreneur who specialises in mining and resource companies. He was closely connected with Regal Petroleum, which almost went bust, and more recently AIM-listed African Minerals, down 6¼p at 375½p, with interests in Sierra Leone.
Marks & Spencer firmed 1.1p to 344.6p despite Goldman Sachs removing the company's shares from its influential Pan European Conviction Buy list.
Bid target Cadbury rose 5½p to 792½p ahead of Wednesday's crucial trading update — the last before US food giant Kraft's bid deadline expires. The confectioner has already rejected an offer of 745p a share from Kraft and plans to outline to shareholders why the company's prospects make it worth so much more. Jefferies is one broker that clearly expects Kraft to increase its offer for Cadbury, or for a counter bid to materialise. It has jacked-up its target from 900p to 945p. Over the weekend it emerged that Kraft had agreed to sell its Maxwell House coffee business to Sara Lee Corporation to provide it with more cash with which to improve its terms for Cadbury.
