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Lloyds bank suffers setback with proposed fundraising

Despite the fact that Lloyds bank has not officially declared its hand regarding a potential £15 billion fundraising, the word in the city is that institutions and private investors are not happy with the situation. Whether this is a game of poker prior to the pricing of the fundraising remains to be seen but some investors seem to have nagging doubts about the potential for the group in the short to medium term, something which may well pull down the price at which new funds can be raised.

With the UK government currently owning around 43% of the company, and unofficially having apparently given its backing to the fundraising, it looks as though the additional capital will be raised at some stage. However, when you consider that the vast majority of the funds which could be raised will go towards paying Lloyds premium for the government's asset-backed insurance scheme, there is little surprise about the lack of demand in the market place.

Some analysts believe that Lloyds bank has played out the financing situation incorrectly by showing its hand at a very early stage and asking for such a large amount at this stage of the economic cycle. Who will win the battle of the wits?

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