9th Oct 2025 17:11
(Alliance News) - Falls in heavyweight lenders HSBC Holdings and Lloyds Banking Group, plus ex-dividend stocks, saw the FTSE 100 fall from recent record highs on Thursday.
The FTSE 100 index closed down 39.47 points, 0.4%, at 9,509.40. The FTSE 250 ended up 11.00 points, 0.1%, at 22,052.83, and the AIM All-Share fell 2.32 points, 0.3%, to 793.70.
The Cboe UK 100 ended down 0.4% at 950.46, the Cboe UK 250 closed 0.3% higher at 19,307.50, while the Cboe Small Companies declined 0.3% to 17,911.72.
HSBC, the second most valuable firm on London's blue-chip index, gave back 5.4% as analysts questioned the price paid as it bought out the minority stake in Hong Kong-based Hang Seng Bank.
HSBC said it has offered HKD155 per share, around USD19.92, for the 37% of Hang Seng Bank it does not already own.
The offer values Hang Seng Bank at HKD290.31 billion, about USD37.31 billion, and HSBC's holding at HKD106.16 billion, or USD13.62 billion.
Citi banking analyst Andrew Coombs said: "While strategic rationale is compelling, and this seems a sensible overall use of capital, we expect investors will query why now and at this price."
Shore Capital banking analyst Gary Greenwood said the acquisition multiple looks "punchy".
HSBC will also pause share buybacks for three quarters as it rebuilds its CET1 ratio to its target operating range of 14.0% to 14.5%.
The Asian-focused lender estimates an impact on its CETI ratio from the deal to be around 125 basis points.
Meanwhile, Lloyds Banking Group reversed Wednesday's gains, closing down 3.3%, after signalling it may need to make an additional "material" provision relating to the car finance mis-selling.
Lloyds added that "uncertainties remain outstanding on the interpretation and implementation of the proposals" and that the size of the potential provision remains subject to "ongoing analysis and review".
The update comes just two days after the FCA said UK lenders face a combined GBP8.2 billion in compensation payments to customers affected by car finance mis-selling, plus GBP2.8 billion in administrative costs, taking the total cost to around GBP11 billion.
KBW currently forecasts total impairments of around GBP2 billion for Lloyds, compared with the GBP1.15 billion already taken, noting that market share analysis of the FCA's GBP11 billion total "suggests 15% or GBP1.65 billion".
Close Brothers slumped 13% as it too warned the FCA's compensation scheme is likely to result in a material increase in its existing provision of GBP165 million.
Defence stocks also lagged after Israel and Hamas agreed to terms for the release of all hostages held by Hamas in Gaza in a major step toward ending the conflict, with Babcock International down 1.1% and BAE Systems down 0.5%.
"This might simply be a small bout of profit taking after a strong run for the defence sector. Russia's invasion of Ukraine in 2022 drove more investors to look at defence stocks and a subsequent heightening in geopolitical tensions in other parts of the world led various governments to spend more money on military and intelligence capabilities," commented Russ Mould, investment director, at AJ Bell.
Peace hopes in the Middle East and well received results from US peer Delta Air Lines gave British Airways owner, IAG, a boost, sending it up 3.2% and to the top of the FTSE 100 leaderboard.
The US airline delivered stronger than expected earnings over the last quarter and gave an upbeat outlook.
Advertising agency WPP and housebuilder Barratt Redrow were prominent blue-chip fallers, down 5.9% and 3.6%, as they traded ex-dividend.
Adding to the downward pressure on housebuilders a downbeat survey from the Royal Institution of Chartered Surveyors.
The RICS report showed new buyer enquiries fell for the third month in a row, house prices remain negative and sentiment on near-term outlook remains cautious.
Anthony Codling, analyst at RBC Capital Markets, said things are unlikely to change ahead of the budget in November.
"The sector looks cheap on a medium-to-long term view, but in the shorter term there are fewer reasons to be cheerful," he added.
In European equities on Thursday, the CAC 40 in Paris closed down 0.2% while the DAX 40 in Frankfurt ended up 0.1%.
Shares in Italian car maker Ferrari plunged 14% after its aims for 2030 fell short of loftier forecasts.
Ebitda of at least EUR3.6 billion is expected for 2030. RBC noted this implies a compound annual growth rate of 6%, well below the 10% rise implied in the 2022-2026 forecast outlined three years prior.
"The 6% CAGR is likely conservative, but investors are likely to interpret a downshift in Ebit growth from prior history," RBC analysts commented.
Meanwhile, minutes from the most recent European Central Bank meeting showed all policymakers supported the move to leave rates unchanged.
There was "no immediate pressure to change policy rates at the current meeting" the minutes said.
"The environment remained more uncertain than usual, especially because of the still volatile global trade policy environment but also owing to geopolitical developments. Such uncertainty could also justify keeping interest rates unchanged," the minutes read.
Sterling drifted lower as the dollar gained strength. The pound was quoted lower at USD1.3305 at the time of the London equity market close on Thursday, compared to USD1.3406 on Wednesday.
The euro stood at USD1.1563 compared to USD1.1615. Against the yen, the dollar was trading at JPY153.11, higher compared to JPY152.68.
Stocks in New York were lower at the time of the London close. The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite all traded down 0.3%.
The yield on the US 10-year Treasury was quoted at 4.15%, widened from 4.12% on Wednesday. The yield on the US 30-year Treasury stood at 4.73%, stretched from 4.71%.
Gold traded at USD4,020.10 an ounce on Thursday, down against USD4,044.28 on Wednesday. Brent oil traded at USD65.95 a barrel on Thursday, down from USD66.40 late Wednesday.
The biggest risers on the FTSE 100 were IAG, up 12.80 pence at 412.80p, Anglo American, up 63.00p at 2,963.00p, Weir Group, up 58.00p at 2,860.00p, SSE, up 32.50p at 1,817.00p and Schroders, up 6.20p at 399.00p.
The biggest fallers on the FTSE 100 were WPP, down 21.70p at 345.90p, HSBC, down 57.40p at 1,008.60p, Barratt Redrow, down 14.00p at 375.40p, Lloyds Banking Group, down 2.88p at 83.50p and Burberry Group, down 42.00p at 1,223.00p.
Friday's global economic calendar sees producer price inflation data in Japan and the Michigan consumer sentiment index in the US.
Friday's UK corporate calendar has a trading statement from recruitment company, Hays.
By Jeremy Cutler, Alliance News reporter
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