Lloyds bank set to raise an additional £4 billion
It has been revealed that Lloyds bank will be raising a further £4 billion via the sale of new shares to existing shareholders. The move, which took some analysts by surprise, will see a further injection of capital into the bank's coffers and offer the opportunity to payback preference shares which are demanding nearly £500 million in dividends each year. However, there is concern as to whether existing shareholders will be in a position where they would be willing to invest more money to a company which has seen a dramatic fall of late.
Interestingly, the whole share issue has been underwritten by the UK Treasury which means if existing shareholders snub the issue of the new offer of shares, even though they will be offered at a discount to the current share price, the authorities would be obliged to take up all shares left over. This could increase the government's stake from 43.4% to a significant 65% although looking to the longer term the bank would have a far stronger balance sheet and be better prepared for the good times when they finally arrive.
Whether this is the first of a number of similar operations in the UK banking sector remains to be seen as many analysts had expressed concern that Barclays bank had not taken advantage of the recent rise in its share price to raise more funds.
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