Barclays was the worst performing bank, down 5 per cent to 141.5p as JP Morgan cut its price target from 210p to 150p and warned that its Middle Eastern bailout would cost £3.8 billion more than a government bailout.

JP Morgan's Carla Antunes da Silva warned that the group would either lose market share or profitability in lending to home borrowers and small businesses, since the state-controlled banks would be forced to keep lending to these markets.

It cut its earnings per share forecasts for next year by 52 per cent.

Meanwhile HBOS gained 11 per cent to 70.4p on expectation shareholders of Lloyds TSB would vote for the takeover.

Mr da Silva cut his rating on all the UK banks but most of the others were broadly flat after heavy falls in recent days.

The FTSE 100 lost 83 to 4,125.25.

Legal & General lost 11 per cent to 68.8p after JP Morgan on Tuesday gave warning that it was most likely insurer to issue a profit warning as the Financial Services Authority might force it to writedown a greater proportion of its assets.

Xstrata was down 6 per cent at 748p on fears that it would have to take writedowns of acquisitions, such as Falconbridge and Eland, made during the boom.

Experian gained 11 per cent on unveiling rising margins and saying it was well placed to grow in the credit crunch.

DSG International fell 14 per cent to 13.75p after Citigroup upgraded some retail stocks but cut its target on DSG from 30p to 18p. It also lowered Marks & Spencer to 190p. M&S was down 4 per cent after the departure of George Davies and news that it had begun a sale early.

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