HBOS PLC, the parent company of the Bank of Scotland and mortgage lender Halifax, announced yesterday it was mulling a £4 billion (US$7.95 billion) rights issue to bolster its capital base and had booked writedowns of £2.84 billion this year.
That compared with write-downs of £227 million last year
HBOS shares fell a quarter point in early trading on the London Stock Exchange to 494.5 pence.
The banking group said it expects more challenging economic conditions ahead.
Last week, the Royal Bank of Scotland group announced a £12 billion rights issue to shore up its capital position.
HBOS said it would offer two new ordinary shares for every five existing ordinary shares at 275 pence per share.
The board set a new target tier 1 ratio of between 8 percent and 9 percent, and a target core tier 1 ratio of between 6 percent and 7 percent.
“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,” group chief executive Andy Hornby said.
“In the long term we remain optimistic about the fundamental prospects for our core businesses. The group will be well positioned to benefit over time from a number of selective growth opportunities across our businesses where there will be scope to earn good returns,” he said.
Hornby said the group aimed to achieve a return on equity in the mid-teens.
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