HBOS looks to banking stock surge to boost cash call

Supporters of HBOS's £4bn rights issue were hoping last night that yesterday's surge in banking stocks could boost last-minute demand for the bank's capital raising.

Shares of Britain's biggest mortgage-lender rose 5.4 per cent to 268.25p but were still adrift of the 275p offer price for the rights, meaning that investors should be able to buy the stock cheaper in the market. Shareholders have until 11am today to take up their rights to the new shares.

But with the shares trading closer to the rights price, big investors that need to buy large chunks of HBOS stock to maintain their holdings might choose to buy the shares.

Observers said the closing of the gap with the offer price could give long-term investors who want to support the capital raising enough justification for taking up the rights.

Even if there is a late surge, Morgan Stanley and Dresdner Kleinwort, the underwriters of HBOS's cash call, will be left with large holdings of the bank's shares.

A "substantial" proportion of the share offer, designed to boost the bank's capital strength as the economy slows, is said to be sub-underwritten by long-term existing investors that are likely to hold on to the stock. The banks' underwriting guarantees that HBOS will get the money.

The FTSE 350 banks index rose 6.5 per cent after strong banking results in the US helped to lift the gloom that had driven shares of UK lenders to a new 10-year low during trading on Thursday. Bradford & Bingley's £400m rights issue was approved by shareholders yesterday, with 93 per cent of votes cast in favour of the share sale and only 3 per cent voting against. The buy-to-let lender's shares rose 7.5 per cent to close 1p below the 55p rights price.

Barclays has shunned the rights issue route by lining up "anchor" investors led by the Qatar Investment Authority to buy £4.5bn of new shares if existing shareholders fail to purchase them at 282p.

Barclays shares surged 8.9 per cent to 290.5p but the rise was too late for yesterday's 11am deadline for taking up the shares.

Royal Bank of Scotland raised £12bn in its rights issue, which closed early last month when the gloom about the financial sector had lifted temporarily. The bank's shares jumped 8.9 per cent to 179.5p yesterday but were 10 per cent the 200p rights price.

The fraught progress of B&B and HBOS's rights issues will deter banks from using that route to raise capital in the near future. A number of bank analysts believe that UK lenders may need to raise fresh funds as the economic slowdown boosts bad debts.

UBS analysts said yesterday that Lloyds TSB, which has not joined the search for new funds, could find its capital under pressure. The analysts predicted a 30 per cent cut in Lloyds' dividend next year because the bank will want to avoid a rights issue and has little in the way of non-core assets to sell.

Lloyds' shares shrugged off the analysts' concerns, rising 5.8 per cent.

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Jamie and Emily Pharro discovering their friend's prank
video
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
News
i100
Arts and Entertainment
O'Toole as Cornelius Gallus in ‘Katherine of Alexandria’
filmSadly though, the Lawrence of Arabia star is not around to lend his own critique
Life and Style
fashion
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Senior Project Manager

£60000 - £90000 per annum + Bonus: Harrington Starr: Global leading Energy Tra...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Oil & Energy Business Anaylst

£45000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Harrington Sta...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment