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UPDATE 1-FTSE gains clouded by Provident Financial's 'catastrophic' slump
August 22, 2017 / 4:24 PM / 3 months ago

UPDATE 1-FTSE gains clouded by Provident Financial's 'catastrophic' slump

* FTSE 100 ends up 0.9 percent

* Provident Financial down more than 60 percent

* Solid results, copper prices support mining shares

* Homebuilder Persimmon hits record high after results (Adds closing prices, details)

By Danilo Masoni

MILAN, Aug 22 (Reuters) - A fall of more than 60 percent by subprime lender Provident Financial following another profit warning dominated London trading on Tuesday, although the broader market was supported by stronger commodities and a weaker pound.

The blue-chip FTSE 100 index rose 0.9 percent, underpinned by mining shares and gains in almost all stocks. The mid-cap index, which is more domestically focused and is often penalised when sterling falls, added 0.5 percent.

Provident Financial tumbled 66 percent, its biggest ever daily drop, after it issued its second profit warning in two months, cancelled its dividend and said its chief executive was leaving.

“A catastrophic share price drop in a subprime lender – it’s like the last 10 years never happened. Is this a Northern Rock moment? Probably not – this is more about management failings than a market-wide issue. Rivals are taking market share,” said Neil Wilson, senior market analyst at ETX Capital.

“Management will take a long time to regain credibility. This comes just a couple of months after a profits warning off the back of the disruption of moving to the new operating model,” Wilson said.

BHP Billiton rose 2.1 percent after the world’s largest mining company reported a surge in underlying full-year profits and said it would exit its underperforming U.S. shale oil and gas business.

Antofagasta, which also reported well-received results as it tripled its dividend after its first-half profits surged, gained 1.9 percent.

Also among top gainers on the FTSE, Rio Tinto and Glencore both rose more than 2 percent, as the price of copper climbed to a three-year high.

Mid-cap miner Kaz Minerals surged more than 7 percent. Its shares have more than doubled this year, prompting Goldman Sachs analysts to downgrade the stock to neutral even if its business is expected to show strong growth in the next two years.

Oil companies Royal Dutch Shell and BP also gained as crude oil prices rose.

Elsewhere, shares in UK homebuilder Persimmon, up 1.7 percent, touched a record high after it posted a 30 percent rise in first-half profit.

Reporting by Danilo Masoni; Editing by Larry King and David Holmes

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