LONDON (MarketWatch) -- Banks traded sharply lower in a downbeat London share market on Friday after lender HBOS revealed that its bad debt charge has soared to $7.5 billion.
Shares in troubled U.K. bank HBOS (UK:HBOS: news , chart , profile ) fell 16.1% after it said that its bad debt charge has soared over 70% to around 5 billion pounds ($7.5 billion) in the last couple of months as credit quality has deteriorated sharply and asset prices have fallen further.
The group said impairments on corporate loans have jumped over 90% in two months to 3.3 billion pounds from 1.7 billion pounds at the end of September. Charges for secured retail lending rose 75% to 700 million pounds and unsecured lending charges increased 25% to 1 billion pounds over the same period.
The bank, which is planning to raise 11.5 billion pounds, mostly from the government, and is being bought by Lloyds TSB said the continued weakening of the U.K. economy means impairment charges are likely to rise further. Lloyds TSB shares fell 15.3%. See full story.
Other banks were also sharply lower, with Royal Bank of Scotland down 12.9%, Barclays down 7.7% and HSBC Holdings down 3.9%.
Overall, the U.K. FTSE 100 index (UK:UKX: news , chart , profile ) fell 2.7%, or 119.95 points, to 4,268.44. Other European shares, Asian markets and U.S. stock futures were also sharply lower. See Europe Markets. See Asia Markets.
The losses came after a $14 billion bailout deal to aid the struggling Big Three U.S. automakers collapsed in the Senate on Thursday night, as a dispute over union wages derailed a compromise between Republicans and Democrats who'd worked feverishly to throw Detroit a lifeline. Read more on autos.
Oil producers lower
Oil majors gave back some of the previous sessions' gain, with the move tracking a retreat in crude-oil futures. Light sweet crude futures fell $1.48 to $46.50 a barrel.
Shares in BP dropped 3.3%, Royal Dutch Shell shares declined 3.8% and natural gas producer BG Group (UK:BG: news , chart , profile ) fell 3%.
Away from financials and insurance group Friends Provident (UK:FP: news , chart , profile ) was among a handful of gainers, with shares in the firm up 0.9% after Morgan Stanley upgraded the firm to equalweight from underweight.
"We have picked stocks based on three key elements -- balancing valuation with risk assessment, inherently preferring non-life and not willing to take large downside risk," the broker said.
Outside the top index, shares in media and events group United Business Media (UK:UBM: news , chart , profile ) fell 1.3% but outperformed the broader market. It said Friday that it expects to deliver 2008 earnings and revenue in line with the market consensus.
The combination of the strong dollar and a good performance from its major events, data and workflow products meant the firm achieved its highest monthly operating profit of the last six years in November, it said. However, certain print advertising and secondary events remain weaker, it noted.
UBM said its previously announced action to reduce costs will result in a fall of around 350 in its global headcount in the second half of the year.
