Market report: Friday close

NEW accounting policies will take a heavy toll of profits among the High Street banks with

That is the conclusion of US broker Morgan Stanley, which has cut its 12-month target for the shares from 540p to 500p while repeating its underweight rating.

Barclays fell sharply yesterday after warning that bad debts were growing sharply for the first time since the early-Nineties recession.

Morgan Stanley argues that could hit Barclays more than rivals because it has a bigger exposure to unsecured credit. The bank upset brokers by confirming signs of a slowdown in its UK retail arm.

The introduction of IFRS accounting rules is likely to leave a big dent in the group's earnings, adds Morgan Stanley.

Other banks such as Lloyds TSB, steady at 458p, are also likely to be affected, but brokers say results from Alliance & Leicester, 7½p cheaper at 851½p, will be in line with its February guidance.

Barclays slipped a further 6p to 522p today. UBS remains a buyer but has slashed its target from 680p to 620p while WestLB has lowered its sights from 525p to 475p.

There has been a general cooling off by brokers toward bank shares this week. Credit Suisse First Boston, for instance, urged clients to give them a wide berth yesterday. Investors in London showed none of the enthusiasm for chasing share prices higher than had been seen elsewhere in the world.

Overnight New York's Dow rose sharply, supported by a raising of US economic growth figures. Markets in the Far East also pushed ahead today.

By contrast, London's response was muted. The FTSE 100 index fell 13.5 at 4981.4 in thin trading ahead of the long weekend.

Takeover target Whitbread ran into profit-taking after touching 925p yesterday on the back of the Evening Standard's report that private equity companies, including Apax Partners and CVC, were looking to band together to break up the business. Whitbread warned recently it was feeling the effects of the spending slowdown. The shares retreated 11½p to 913½p. ICI was one of the few bright spots among blue-chips, rising 1½p at 258½p. Smith Barney has upgraded from hold to buy because it thinks they look cheap.

'ICI is trading at a discount to its peers on all key metrics', says the US broker.

The firm's progress is based on volume growth as well as restructuring and lower costs. About 70% of its sales are generated in Asia and the Americas.

Broker UBS has raised its recommendation on Cable & Wireless, 2½p easier at 134p, from neutral to buy following yesterday's full-year numbers. In a note to clients, the broker said revenues were exactly in line with forecasts. Cash control was again a highlight, with year-end net debt of £1.3bn, almost £300m better than the broker expected.

B&Q retailer Kingfisher dipped 2¾p to 259p. US securities house Goldman Sachs says that, if the trend continues, margins will come under further pressure.

Goldman has cut its pre-tax profit forecast for 2006 by almost 9% to £610.6m. JJB Sports came under fresh selling pressure losing 1¼p at 180¼p. Deutsche Bank has moved from hold to sell and cut its target from 210p to 160p.