Surrounded by the issues of rights the HBOS Board meets to boost up its capital
HBOS—UK'S largest mortgage lender—is reportedly considering to muster up 4 billion pounds from the shareholders to undo the effects of writedowns and worsening economic scenario.
London(online-unsecured-loans) April 29, 2008—According to newspaper reports HBOS board meeting is expected to propose between 2 to 4 billion pounds through new stock's rights issue. It seems also certain that the bank will be forced to raise these funds to tackle the credit crunch. However in the absence of any direct comment from the HBOS officials, there is much speculation regarding the said measure.
The reason for the present speculation is RBS's—HBOS's main rival in mortgage lending—last week's increment to its capital base through a similar measure. The measure seems all the more inevitable because HBOS has one of the most strained capital ratios in the UK.
“If the 3 billion pound writedown figure is correct (and is taken against the trading book), then in our view the board will consider that a 5 percent equity tier 1 ratio is too low," analysts at the Cazenove explained, further adding that the said writedown has the capacity to cut the banks equity tier 1 ratio to 5 percent.
An unknown banking source elaborated that in order to keep the balance sheet above the crisis level some leading banks could follow RBS. The credit crunch is expected to prevail this year thus forcing the regulators to increase pressure on the banks, the same source added later.
Earlier this month Mike Ellis, HBOS Finance Director, had indicated at a conference that his bank might further bring down asset valuations during the first quarter to offset the effects arising due to financial market's deterioration.
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