Lloyds TSB, one of UK’s largest banks is embarking on a plan to raise £13.5 billion through a rights issue. The size of the share issue is a world record – and follows in the footsteps of Lloyds’ previous £4billion capital raising in May and £13billion in October 2008.
The fact that the bank can raise such enormous funds in the private sector is a sign of growing confidence in its prospects.
According to the Daily Mail, Lloyds already has 27billion ordinary shares in issue, and will need to issue billions more.
Its stock market value is £23.5billion, and it wants to raise £13.5billion in fresh cash.
It will need to price these shares at a discount to the current price, and says this will be at between 38 per cent to 42 per cent of the planned ex-rights price.
The government, which will underwrite its own 43 per cent stake, could get around £130million in underwriting fees.
Bank of America Merrill Lynch, Citigroup and UBS could get tens of millions for helping lead the rights issue with smaller payouts to Goldman Sachs, HSBC and JP Morgan Cazenove.
More recently the Guardian reported that the Lloyds Banking Group, which is 43.5% owned by the taxpayer, will reduce its mortgage business by 19% and its current account business by 4.6%. To do this it will sell the former TSB business, Lloyds TSB Scotland, the business run under the Cheltenham & Gloucester brand, and its online business Intelligent Finance. At least 600 branches are set to be sold, as well as the mortgage, current account and savings books associated with them.
Sun, Nov 15, 2009
Current Affairs