OLD MUTUAL made a rare showing as the most heavily traded large-cap stock as a £146 million “dividend wash” in the South African life insurer was wrung through the London stock market.

The £10 billion company has enjoyed a good run this week, helped by Tuesday’s forecast-beating third-quarter figures from Nedbank, its Johannesburg offshoot.

But it was the volumes in Old Mutual that stood out yesterday as two blocks of 80 million shares, each equating to a 1.5 per cent stake, changed hands shortly after lunch at 182½p. To seasoned observers, they bore all the hallmarks of a “dividend wash”, whereby one investor swaps dividends for cash with another in order to benefit from tax breaks.

Both blocks of stock were very large, and in round-numbered tranches, they were conducted at very close to the mid-price, meaning there was minimal impact on the wider market, and critically, they were traded within a month of the shares trading ex-dividend: which, in the case of Old Mutual, was October 18.

Here, a British institutional shareholder would have entered into an agreement to sell its shares to a continental European shareholder before the ex-dividend date, and then buy the shares back after the exdividend date. The trade only creates value because some European states have more attractive tax rules for dividends than Britian.

Yesterday’s activity — said to have been handled by Merrill Lynch, Old Mutual’s joint stockbroker — represented the unwinding of the latter component of the trade. With the after-effects of Nedbank’s numbers, beneficial movements in the South African rand, and lingering speculation of consolidation among life insurers providing a tail wind, Old Mutual closed 7¼p higher at 185¾p. The FTSE 100 gained 25.1 to 6,254.9, a new five-and-a-half-year closing high.

Strong figures from Nationwide Building Society had a beneficial effect on the wider banking sector ahead of the opening of its pre-close update season later this month. Bradford & Bingley gained 18½p to 468¼p, with Northern Rock up 35p at £12.18.

Among yesterday’s speculative features, Cadbury Schweppes, up 5p at 532p, was bolstered by vague rumours of a 640p bid approach. Shire Pharmaceuticals added 42½p to £10.52½ on suggestions that AstraZeneca, up 10p at £30.80, is considering an approach in order to address the hole in its product pipeline. Anglo American slipped 3p to £24.81, despite murmurs of further Chinese stakebuilding.

Jitters ahead of today’s trading update — which will include details of its efforts to rectify boiler problems at its Hinkley Point reactor — left British Energy 16½p off at 468½p.

Next rose 46p to £19.24 as Credit Suisse repeated its “outperform” recommendation and £20 target after a meeting with David Keens, the clothing retailer’s finance director. Tony Shiret, analyst, said Mr Keens did not appear unhappy with market consensus estimates, despite taking a cautious stance on near-term sales growth.

• NEW YORK: Shares rose for a fifth straight day as investors bet that a sharp slide in crude oil prices would boost profits. The Dow Jones industrial average closed at 12,305.80, up 54.10 points.

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