Lloyds Banking eyes £15bn rights issue?
Thursday, 08 October 2009 09:52
Reports have emerged Lloyds Banking is looking at initiating Britain's biggest ever rights issue to avoid the government's toxic asset insurance scheme.
The bank fears fully signing up to the asset protection scheme (APS) would push up the government's holding in Lloyds Banking up from 43 per cent to as much as 65.5 per cent.
With the Lloyds Banking chiefs keen to keep a lid on the government stake, investors are being sounded out over a rights issue.
The FT reports the Financial Services Authority (FSA) is looking into the deal - which could see the sale of some assets such as Scottish Widows.
Last month, Lloyds Banking confirmed it was in discussions with the Treasury over its participation in the APS.
The bank is pushing to cut the cost of the insurance as the economy improves and the performance of its loan books is expected to be better than feared.
Much of the problem assets Lloyds Banking now holds come from the merger with HBOS - and its heavy position in the mortgage market.
It also confirmed alternatives, such as a rights issue, were being discussed.
It is uncertain whether the government would buy into the rights issue and increase its stake in the company.
Although it may be possible the state's stake in Lloyds Banking would remain at the current level and the government could still push more cash in - as the total number of shares rises.
This morning, the Lloyds Banking share price was down 1.21 per cent to 94.50p.
Lloyds Banking is facing further pressure from European authorities.
Although the UK government pushed aside competition rules aside to allow the merger of HBOS and Lloyds TSB at the height of the crisis, the European Commission could force the bank to reduce its size.
It is reported European authorities could push Lloyds Banking even into the sale of Halifax to reduce its market share.
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