THE FTSE 100 struggled to make much progress as worse than expected news from the banking, aviation and telecoms sector spooked investors.
The index ended the week up just 2.1 points at 5354.7 after poor performances from some of the City's best known names including Lloyds TSB and BT.
Lloyds was among the worst performers of the week, losing 12.65% by close, following its surprise a
nnouncement that net income had fallen by 63% in the first half of the year. Lloyds had been seen as one of the safer bets in the banking sector until Wednesday's revelation.
HBOS also posted a sharp drop in first half profits, of 51%, but analysts said the results did not contain "any nasty surprises". HBOS stock fell by a smaller margin, closing down 3.65% at 290.5. Royal Bank of Scotland shares ended the week down 3.42% at 211.75.
BT stock also faced sharp declines after new chief executive Ian Livingston, who took over from Ben Verwaayen last month, revealed an unexpected 7% fall in pre-tax profits. The surprise news sent BT stock tumbling 12% on Thursday to close down 14.12% at 173.90 by the end of the week.
The announcement on Friday that British Airways had suffered an 88% drop in second quarter pre-tax profits sent its shares tumbling by 2.95%, although the earlier revelation that it is in talks with Spanish airline Iberia over a possible tie-up sustained the share price over the week to close up 5.48% at 255.25.
Tomorrow will kick off another busy reporting week in the City with the banking sector expected to steal most of the limelight.
HSBC, which reports tomorrow, has so far taken two hits of $17.2bn (£8.7bn) and $5.8bn (£2.9bn) from the credit crunch. At an earlier update in May, management indicated that strong growth in emerging markets was helping to offset poorer business elsewhere, but analysts are unconvinced that HSBC will have done enough to avoid a significant slide in half-year profits. The City has pencilled in a dive of between 18% and 37% in interim pre-tax profits, coming in at between $8.95bn and $11.68bn (£4.53bn to £5.91bn).
Analysts at Citigroup think the bank's writedowns may not have accelerated much since the first quarter, but the worst losses are expected from its American business HFC. As a result, pressure from activist investor Knight Vinke to offload the US business is expected to rear its head again.
Also reporting this week is Barclays, which recently completed a £4.5bn fundraising with much of the extra cash coming from sovereign wealth funds. Barclays has so far revealed £2.6bn in credit crunch-related writedowns, with £1bn already announced this year.
Although management noted "resilient trading" at an earlier update, analysts at Citi expect its impairment losses to total £1.6bn in the first half. Pre-tax profits are tipped to have shrunk by around a third to £2.8bn.
ITV will be hoping for a boost from the new series of Trinny And Susannah which begins this week as executive chairman Michael Grade faces another tough results announcement on Wednesday. He is expected to reveal a sharp fall in half-year profit as advertising revenues continue to suffer amid the slowing economy.
At the broadcaster's first-quarter update in May, Grade said he expected ITV to outperform the UK advertising market for the first time in eight years, but the protracted credit crunch is putting advertisers and media groups under increasing pressure. Sam Hart, media analyst at Charles Stanley, has pencilled in a 36% drop in half year pre-tax profits to £82m.
Week aheadTOMORROW
Fidessa, HSBC, Intertek, New Britain Palm Oil, Senior (interims); 888, Sage (trading updates)
TUESDAY
Cookson, Drax, GKN, Legal & General, Meggitt, Rotork, Spirent, Sportech (interims)
WEDNESDAY
Access Intelligence, Arc International, Aricom, F&C Asset Management, Inmarsat, ITV, Liberty International, Old Mutual, Morgan Crucible, Nichols, Spring, Standard Life (interims); Quintain, WS Atkins (trading updates); CML Microsystems (AGM)
THURSDAY
Barclays, Friends Provident, Ladbrokes, Millennium & Copthorne, RSA Insurance (interims); Signet (trading update)
FRIDAY
Royal Bank of Scotland, Schroders, Stanley Gibbons (interims)
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