Monday 3 November 2008

British banks Lloyds and HBOS raising $28 billion in new capital

British banks Lloyds and HBOS said on Monday that they are raising 17 billion pounds ($27.7 billion) of new capital, backed by the government
, and confirmed that Lloyds is going ahead with its planned takeover of HBOS.

Lloyds TSB Group PLC said it will try to raise 4.5 billion pounds ($7.3 billion) from investors in a share offering, while HBOS PLC is looking for 8.5 billion pounds ($13.8 billion) worth of investor money, the banks said in a statement.

However, if private investors do not buy the shares, the British government has guaranteed that it will _ on the condition that Lloyds takes over HBOS, on the terms agreed to in October.

The government has also agreed to buy a total of 4 billion pounds ($6.5 billion) worth of preference shares in the two banks on the same condition.

Monday's statement allowed Lloyds and HBOS to confirm that the merger, which has been plagued by market doubts, is indeed going ahead.

``The acquisition of HBOS represents a compelling opportunity to accelerate Lloyds TSB's strategy and create the U.K.'s leading financial services group,'' the banks' statement said.

It added the name of the new company would be Lloyds Banking Group PLC.

In separate statements Monday, both Lloyds and HBOS also published their third quarter earnings reports, which revealed that both suffered sharp falls in profits during the third quarter as a result of the ongoing market turmoil and mounting bad debts.

Lloyds said it had sustained a ``substantial'' fall in pretax profits for the first nine months of the year, with before-tax profit in its wholesale and international banking division dropping 270 million pounds ($438 million) during the third quarter compared to a year earlier.

HBOS said writedowns will reduce its 2008 profit by 5.2 billion pounds ($8.4 billion) and cut reserves by 3.8 billion pounds ($6.2 billion).

The losses are evidence that both banks need the government money, which they will only receive if the takeover is completed.

The planned merger would also result in important cost savings for the banks. Lloyds said Monday its takeover of HBOS would save it over 1.5 billion pounds ($2.5 billion) a year _ more than previously estimated.

Lloyds did not say how many jobs would be cut following the takeover.

Source: EconomicTimes

No comments:

Post a Comment

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.