When the head of Rentokil Initial’s most troubled division walked out last week, many in the City feared the worst for the rodent control and parcel delivery group’s recovery plan.

Yesterday, however, one of the company’s sternest critics in the Square Mile admitted that he had been wrong to be concerned about the departure of Petar Cvetkovic, who led City Link, Rentokil’s parcels business.

Mike Murphy, an analyst for Numis, ditched his “sell” rating and advised clients to “buy” after talking to industry sources, who suggested that Mr Cvetkovic was leaving on a high, rather than a low, and that the position of the group was better than he had expected.

Mr Murphy believes that Rentokil has been successful in substantially cutting its cost base in a savage market and that the City Link unit could now achieve break-even in 2009, rather than his previous forecast of a £20 million loss.

Rentokil’s shares rose ½p to 89¼p yesterday and Mr Murphy said that they were likely to receive a further boost with evidence of a recovery in the City Link business at the group’s interim results presentation on July 31.

The FTSE 100 rose 54.87 points to 4,443.62, driven by miners and financial shares and assisted by a strong start to the week on Wall Street as CIT, the commercial lender, neared a deal with bondholders to avoid bankruptcy.

In London, Lloyds Banking Group rose 4.51p to 72.01p after weekend reports that it may surprise the market by reporting a modest profit for the first six months of the year. Credit Suisse poured cold water on the notion of an interim profit, suggesting that rising bad debts would offset any gains elsewhere. Royal Bank of Scotland rose 1.39p to 39.79p and HSBC closed up 14p at 559p.

Insurers were also in focus after Resolution, down 2p to 90¼p, sweetened its offer for Friends Provident, up 1.73p to 73.23p. The rest of the sector was buoyed after Morgan Stanley said that concerns about solvency were overdone, the biggest beneficiary being Legal & General, up 4.32p at 61.38p. Prudential rose 21½p to 409½p and Aviva closed 9¼p up at 327¾p.

Kazakhmys was the index’s top riser, ending the day up 52p at 737½p. Rio Tinto rose 79p to £22.33, lifted by strengthening metals prices.

Smith & Nephew, down 10.7p at 440¾p, was the biggest blue-chip faller after Cazenove downgraded its rating on the medical device maker to “in-line”, from “outperform”, citing a potential slowdown in elective procedures in the wake of the swine flu outbreak. The broker said that a protracted pandemic could mean that hospitals focus on freeing up beds and cancelling non-critical operations.

British Airways was also hit by swine flu, falling 3.2p to 132.8p, after reports that it was checking passengers for the virus.

In the FTSE 250, Bovis Homes rose 22.2p to 439¼p after UBS raised its rating to “buy”, from “neutral”, citing its optimism about continued strengthening of the housing market.

• New York: Shares were lifted by expectations that CIT would do a deal with bondholders that could remove uncertainty and point to a healthier financial sector. The Dow Jones industrial average was up 104.21 points at 8,848.15 at the close.

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