Market Report: Worries about loans debit Barclays' share price

JITTERY sellers ruffled Barclays, the banking group, sending the shares tumbling 17p to 550p at one time.

Worries about the bank's construction and property loans did much of the damage. Stories circulated that it had been forced to cut lending because it faced more heavy losses.

But Barclays, which has been tormented by bad construction and property debts as the recession deepened, moved to distance itself from the story.

There had been no policy change. It was evident it had been reducing loans for some time, it said. Construction and property lending had been lowered in each of the past three years.

The group's shares, which fell 10.5p on Wednesday, closed at 554p. They have been as high as 640p this year.

The group also had to contend with negative comments from S G Warburg. It repeated 'reduce' advice and said the shares were on a too demanding rating and drew attention to the securities side, which must still be suffering from the slowdown in corporate and investment business.

Barclays astonished the stock market last month when it tripled interim profits to more than pounds 1bn, with a dramatic decline in bad debt provisions providing much of the increase. But the upsurge masked a profits slump at the investment arm.

Other banks felt the draught from the Barclays story. Lloyds retreated 9p to 530p and National Westminster 6p to 470p.

The rest of the market produced another indifferent performance. Blue chips, as measured by the FT-SE 100 index, achieved a modest gain but the supporting index was again lower. Trading was slack.

Government stocks were firm, with gains of up to pounds 7 8 . For once they shrugged off the influence of US and German bonds.

Supermarkets had an eventful session as a Tesco promotion in the North-west sparked fears of another national price war. Tesco, down 4p at 239p, has widened the range of products subjected to lower prices.

Not an unusual move, but it was enough to lower Argyll 10p to 277p, Asda 2.75p to 63p and J Sainsbury 9p to 416p.

William Morrison's sharp profit increase at first lifted the shares. By the close they were nursing a 1p fall to 138p as the price war scare took its toll.

But the supermarket chain's performance was inspirational compared with other groups reporting.

Guinness gave up 13p to 448p on disappointing interims and a cautious trading statement.

McDonnell Information Systems crashed 104p to 112p following a profits slump. The shares were floated at 260p in March.

Jeyes, the disinfectant group, was another down the proverbial plughole, off 59p at 176p as it fell into losses. The shares touched 500p last year.

EW Fact, the accountancy training group, tumbled 31p to 103p. It warned profits would come in below the pounds 3.3m the market had expected. Interim profits doubled to pounds 1.2m.

Geest, the fresh food group, dropped 31p to 189p. Half-year profits were up but a second-half loss is expected.

More buybacks through the market continued to encourage electricity shares.

Norweb, which acquired two million at 808p, fell 5p to 806p and South Wales, 250,000 at 810p, eased 3p to 808p.

Northern, with its inventive tax-efficient buyback largely completed, gave up 31p to 782p.

National Power was unchanged at 463p and PowerGen a shade firmer at 533p as the Government promised to announce next week the date for the sell-off of its remaining 40 per cent shareholdings in the generators.

Reports of more upheavals in the newspaper industry, this time on the distribution front, had newsagents in disarray. John Menzies was cut 18p to 564p and W H Smith 10p to 450p. T&S Stores shaded 2p to 182p.

Granada continued to benefit from investment meetings, improving 7p to 491p.

BTR is still suffering from its poor interims two weeks ago when the shares fell 44p to 338p. They managed a 2.5p gain to 306p as Barclays de Zoete Wedd made bullish noises. Cookson, the industrial products group, was 7p down at 232p, reflecting a share overhang.

Wellcome and Zeneca lost some of their takeover appeal but Glaxo, as if making up lost ground, rose 15p to 574p.

Ryland, a garage group, managed a steady first day performance, closing at 85p against the 80p sale price.

The FT-SE 100 index rose 6.4 points to 3,021.2 but the supporting FT-SE 250 index retreated another 8 to 3,562.1. Turnover was 547 million shares with 23,263 bargains recorded. Government stocks advanced by up to pounds 7 8 .

Navan Resources, the Irish explorer with interests in Eastern Europe and Spain, gained 2p to 155p after placing 4.6 million shares with institutions at 138p. The new cash is needed to continue the development of what is regarded as an impressive gold/copper project in Bulgaria, and for the Spanish metals venture. An exploration programme is to be started in Ireland.

Rutland Trust, the financial group, will lift its cash pile to more than pounds 20m if, as expected, Cott, a Canadian group, exercises its option to buy Rutland's minority stake in the soft drink maker Ben Shaw. The group has 42 per cent of the laminated paper maker Capital Industries, where bid rumours flourished recently. Rutland, at 27p, is expected to use the cash for acquisitions.