The FTSE 100 index rocketed on Thursday as banking stocks surged, supported by the news that fourth quarter UK GDP was revised upwards to 0.5 per cent.
"European banks were the centre of market turmoil two weeks ago so Lloyds paying a special dividend has helped confidence in a sector plagued by worries over bad loans amidst slowing economic growth," said Jasper Lawler, markets analyst at CMC Markets.
Earlier today Lloyds reported that underlying profits rose, while it hiked its dividend and became the FTSE 100's ninth-highest dividend paying stock. Its share price closed 13.57 per cent up at 70.64p.
"The special dividend is definitely a benefit to the stock today," said Mark Foulds, sales trader at ETX Capital. "The government were going to sell some of their stock, but then pulled out... when they see the stock up 10 percent today, they might see it as an opportunity to sell again."
Other banks shared in its success. Barclays closed 5.17 per cent higher at 164.85p per share, while Royal Bank of Scotland ended 5.13 per cent up at 244p per share.
HSBC, meanwhile, rose 3.46 per cent to 448.8p per share. Standard Chartered closed at 398.7p per share, a 2.47 per cent rise.
RSA Insurance also reported some good news. It announced a rise in profits for the year ending December 2015, despite a fall in net written premiums. Its share price ended at 443.2p per share, a 9.81 per cent rise.
BT's share price also rose after regulator Ofcom said that it would not have to spin off Openreach into a separate company (for now). It closed 4.66 per cent higher at 479.8p per share.
It will, however be forced to open up its cable network further to competitors which could be damaging to its dominant position in the market, Lawler added.
International Airlines Group (IAG) jumped ahead of its earnings report tomorrow. It jumped 5.28 per cent to 558.5p per share.