HBOS considering up to £4 billion rights issue

The board of HBOS is to meet today to discuss a multi-billion-pound rights issue to shore up its balance sheet.

Chairman of the group, Lord Stevenson of Coddenham, has called the discussions ahead of the bank’s annual shareholder meeting tomorrow in Glasgow, at which it is expected to announce further write-downs.

According to reports in Sunday papers, it is feared that HBOS will be forced to mark down the value of investments that have been hit by the worldwide credit crunch by up to £3 billion.

The board is being asked to consider raising between £2 billion and £4 billion from investors.

Out of all the UK banks, analysts say HBOS has one of the strongest capital ratios (a measure of a bank’s strength) so it may ride out the crisis without asking its investors for additional funds.

The announcement follows that from Royal Bank of Scotland (RBS), Britain’s second largest bank, who last week confirmed it was preparing to raise billions of pounds through a rights issue to improve its financial position.

The rights issue was announced as part of a trading update and is one of the largest seen in UK corporate history.

HBOS, the UK’s fourth-largest bank, was created from the merger of Bank of Scotland and Halifax and also includes Clerical Medical and Birmingham Midshires.

It has declined to comment on reports about the rights issue.

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