Lloyds Banking 'considering £15bn rights issue'
Lloyds Banking Group is reportedly considering a £15 billion rights issue to reduce its exposure to the government's asset protection scheme.
Shares in the bank fell 5.15 per cent in morning trading after weekend reports the bank could issue new shares in an attempt to strengthen its balance sheet.
Lloyds refused to confirm or deny the rumour, fuelling speculation.
A spokesman for the bank said: "We are working with the Treasury to finalise the detailed terms of our intended participation in the asset protection scheme. We expect to conclude those discussions and agree terms that are in the best interests of our shareholders."
The chief executive of Lloyds, Eric Daniels, and the new incoming chairman, Sir Win Bischoff, are believed to be in favour of raising money from shareholders as the fees associated with the asset protection scheme (APS) - around £15.6 billion - are thought to be too high.
Taking more taxpayer cash would also hand a larger share to the government, which already owns 43 per cent of the bank.
Under the asset protection scheme, Lloyds would be liable for the first £25 billion of losses from qualifying loans but after this point the government would shoulder 90 per cent of the cost, with Lloyds paying the rest.
"Given the overall cost of the APS it bears considering whether Lloyds should look at reducing the extent of its participation in the scheme," analysts at Deutsche Bank said last week.
Lloyds reported £13.4 billion of impairment charges for the first half of the year but added losses at the bank had peaked. Some 80 per cent of its impairment charges on bad debts came from the HBOS side of the business.
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