HBOS sets 4 billion stg rights issue
Written on April 30, 2008
British bank HBOS (HBOS.L: Quote, Profile, Research) unveiled a 4 billion pound ($7.9 billion) rights issue alongside plans to cut its dividend payout to cover additional writedowns on the value of toxic assets and to shore up its balance sheet.
Britain’s biggest mortgage lender, which follows Royal Bank of Scotland (RBS.L: Quote, Profile, Research) in turning to shareholders for cash, announced 2.8 billion pounds of writedowns on Tuesday, broadly in line with expectations.
The bank took a negative fair value adjustment of 970 million pounds in the trading book for the year to date, compared with a modest 227 million pounds for 2007. In the banking book, where writedowns do not affect reported profits, it took a 1.87 billion pound hit after tax.
HBOS will offer to sell two new shares for every five existing shares at 275 pence per share, representing a 45 percent discount to Monday’s close of 495.75p and a 36 percent discount to the stock’s theoretical ex-rights price.
The bank said it now targets a Tier 1 capital ratio of between 8 percent and 9 percent, with a core Tier 1 ratio of between 6 percent and 7 percent, at the higher end of the UK sector.
“We are planning for a more challenging environment ahead and the proceeds of the rights issue should ensure that we benefit from strong ratios even if the macroeconomic environment deteriorates further,” Chief Executive Andy Hornby said.
He added the bank would be well positioned to “benefit over time from a number of selective growth opportunities” across the business, including targeted international growth.
The bank said it would reduce its dividend payout ratio to 40 percent, with the interim 2008 dividend to be paid in shares direct payday loan cash advance. The final dividend for the year is set to be paid in cash, however.
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