Lloyds confirms plans for rights issue

Lloyds Banking Group has today confirmed it is considering a rights issue, in order to repair its balance sheet which was battered following the takeover of rival HBOS, as well as avoiding participating in the Government’s Asset Protection Scheme (APS).

There has been speculation that the bank, which is 43% owned by the taxpayer, has been mulling over a multi-billion pounds rights issue. However, it has only been confirmed by the bank today.

Lloyds has been struggling since it acquired HBOS last autumn - at the height of the financial crisis.

Meanwhile, the megabank said it is exploring ways to avoid participating in the APS and one of the options is to tap investors for cash.

The APS insures against losses arising from toxic assets and Lloyds enrolled in the scheme in March and planned to put £260 billion of loans and investments into the scheme in return for taxpayers getting a larger stake in the group.

However, the bank has been reconsidering its participation since it doesn’t want the taxpayer’s stake to rise any further.

The banking giant confirmed it was in “advanced discussions” with the Government and regulators about its fundraising options, which include the conversion of existing debt into equity.

At lunchtime today, Lloyds shares were up 6.1% at 84.901p.

Discuss this in the Finance Markets forums

Story link: Lloyds confirms plans for rights issue