HBoS rights issue: a £4bn flop
The question surrounding HBoS now is whether the £4bn it has just raised is enough; the bigger question is whether British banks can raise enough for lending growth to expand and promote economic growth.
HBoS's £4bn rights issue has been "the quintessence of a flop", said Robert Peston on bbc.co.uk. The bank got its money, but only around 8% of the new shares were taken up by the biggest British mortgage lender's shareholders, leaving the underwriters trying to sell around £3.8bn of shares. No wonder. The shares plummeted below the subscription price last week as jitters over the US banking system added to concern about the banking outlook here. The key question surrounding HBoS is now whether the £4bn it has just raised is enough, said Jeremy Warner in The Independent.
The bigger question is whether British banks can raise enough to allow lending growth to expand at a healthy clip and thus promote solid economic growth, said Vicky Redwood in Capital Economics; in the five years to mid-2007, annual lending growth averaged 13%. Unfortunately, it's unlikely, said Redwood. Banks have written down £27bn so far and now face around £8bn of UK property writedowns. To beef up their capital bases they can either raise money or stop new lending.
All in all, around £65bn is needed to offset the credit crunch and keep lending at high recent rates. So far £20bn has been raised, mostly from rights issues, and "shareholder fatigue" is already kicking in. "It looks doubtful whether they can even raise enough to allow them to increase their lending at all." The impact on the economy "could be devastating".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Nationwide hikes FlexPlus current account fee by £5 a month – is it worth it?
Nationwide’s FlexPlus current account is a favourite with customers, but it’s worth checking whether you are taking advantage of the perks after the monthly fee went from £13 to £18
By Katie Williams Published
-
Santander launches online pension that offers up to £1,000 cashback
Santander's self-invested personal pension offers customers cashback of up to £1,000 if they invest before 25 April next year - here is everything you need to know
By Chris Newlands Published