Midday Market: shares extend losses as banking woes weigh

Banks continued to lead the FTSE 100 down further by midday amid the results from Lloyds Banking Group.

By 12:05pm, the FTSE 100 had shed 2.1% or 83.42 points, to 3,831.09, while the FTSE 250 was also struggling, off 1.5% or 89.48 points, to 6,034.27.

The US may yet provide a boost, but at present futures are mixed, as investors focus on the news that the government is to increase its stake in Citigroup to around 30-40%.

The bank is expected to announce a deal today that would convert about $25 billion in preferred shares held by the US government into common stock.

Lloyds today confirmed a loss of £10.8 billion at HBOS in 2008, while it said the former Lloyds TSB's profits were down 80% year on year. It also warned that the group would make a loss before writedowns in 2009, pushing the stock even lower.

Lloyds subsequently topped the fallers, down 20.1% or 15.1p, at 59.9p, with the company's failure to as yet agree a deal with the Treasury over the Asset Protection Scheme also affecting the stock.

Peers had also extended losses amid a round of broker updates, with Royal Bank of Scotland 14.5% down and Barclays 9.9% weaker.

Insurers continued to struggle as well, with Old Mutual, Legal & General and Aviva off between 7.9% and 6.6%.

Meanwhile normally defensive pharmaceuticals were sharply down as investors reacted to president Barack Obama's 2010 budget, in which he targeted high drug prices, with the shares down on fears margins may be affected in the world's largest drugs market.

AstraZeneca shed 6.5% while GlaxoSmithKline was off 4%.