June 12 (Bloomberg) -- U.K. stocks dropped, led by HBOS Plc after the bank said its share of the British mortgage market will fall by more than half. Northern Rock Plc and Alliance & Leicester Plc paced the decline.
Imperial Chemical Industries Plc and Scottish & Newcastle Plc led advancing shares after brokerages said the companies may be takeover targets. Rolls-Royce Group Plc climbed after Man Securities Ltd. and Merrill Lynch & Co. recommended investors buy the stock.
The benchmark FTSE 100 Index dropped 4.3, or 0.7 percent, to 6523.2 in London at 3:22 p.m., as 80 stocks fell. The FTSE All- Share Index slipped 0.7 percent to 3371.2. Ireland's ISEQ Index lost 0.6 percent to 9426.81.
Indexes earlier rose after the U.K.'s inflation rate fell to the lowest in seven months in May.
HBOS, Britain's biggest mortgage bank, dropped 3.8 percent to 1,029 pence.
HBOS's share of U.K. mortgages is likely to fall in the first half to 8 percent from 21 percent in 2006, the bank said. Pretax profit excluding one-time charges will increase to about 6 billion pounds ($11.8 billion), in line with the revised median estimate of 19 analysts surveyed by the bank.
Northern Rock, the best-performing U.K. bank stock last year, lost 3.1 percent to 994 pence. Alliance & Leicester, the U.K.'s eighth-largest bank, declined 2.3 percent to 1101 pence.
Shares of ICI rallied 1.4 percent to 525.25 pence. Merrill Lynch & Co. said the U.K.'s largest maker of specialty chemicals could be targeted by Akzo Nobel NV, the world's largest maker of paints and coatings. Analysts said the Dutch company is in a position to ``comfortably'' buy any of its rivals.
Kemira Oyj, the world's biggest supplier of pulp and paper chemicals, would also be ``a good strategic fit for ICI,'' Merrill Lynch wrote in a report to investors.
Source:
http://www.bloomberg.com/apps/news?pid=20601102&sid=aNzaon29SdYI&refer=uk | 
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