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Lloyds reported to be considering £15bn cash call

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by Kay Mitchell

Shares in Lloyds Banking Group have fallen today on the speculation that the banking giant is looking to raise between £10 – £15 billion by selling new shares.

According to reports, the Treasury is said to be in support of the possible plans to raise cash from the stock market, which will therefore reduce the bank’s exposure to the Government’s asset protection scheme (which insures against losses arising from toxic assets).

Should the rights issue go ahead, it would dilute the value of Lloyds shares.

The bank, which is 43% owned by the taxpayer, is believed to be reducing the amount it puts in the asset protection scheme by as much as half, say reports.

Last week, the bank announced its first half results and slumped to a £4 billion loss. While the bank had warned investors that it would make a loss this year – it wasn‘t as severe as many analysts had originally feared.

However, the bank has been forced to write off £13.4 billion in bad debts (over 5 times the £2.5 billion reported a year ago), primarily due to irresponsible lending by HBOS, the bank it rescued last autumn.

As Lloyds TSB, it has already raised £4 billion this year from shareholders, while HBOS, raised £4 billion through a rights issue in June last year.

Lloyds is expected to commence talks this week with leading shareholders over the possible rights issue.

Shares in the bank have fallen by around 4% in early trading today.

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News posted: August 10, 2009

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