Financial stocks regained lost ground this week pushing the FTSE 100 up 63.3 points to 5430.6.

UK banks followed an overnight rise in US financials which climbed on the back of hopes that Lehman Brothers may be the subject of a hostile bid.

HBOS, hit in recent sessions on fears that bad debts could rise, rose 11.25p to 283.25p. Lloyds TSB added 11.75p to 291.75p, Royal Bank of Scotland put on 5.75p to 215.25p and Barclays gained 8.75p to 319.75p.

Insurers also rose after Benfield, up 82p to 353p, agreed to a £844 million takeover by Aon, the US insurance brokerage. Aviva gained 15p to 492p, while Prudential added 15.5p to 522p.

However, International Power lost 4.75p to 383.75p, as the owner of the Rugeley coal-fired power station said that the estimated cost of recent outages at the Staffordshire site had risen by £25 million. It has already estimated the financial impact of the extended outage at one of its Rugeley units at £45 million.

The higher bill comes from problems with a second unit, although some of this cost may yet be recovered from its insurers.

In the second string, Rentokil Initial fell 3.75p to 70p after the pest control to parcel delivery group posted worse-than-forecast first-half results.

Bradford & Bingley also lost ground, down 1p to 50.5p, after the underwriters of its rights issue were forced to take up the bulk of the shares.

SSL International, the Durex condom maker, rose after Goldman Sachs added the stock to its conviction buy list, citing further scope for consolidation in the healthcare sector.

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