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Lloyds bank decides to pursue £15 billion rights issue

While only a few weeks ago it seemed certain the Lloyds bank would ask investors for £15 billion to avoid the UK government's toxic asset insurance scheme, the subject has been fairly quiet over recent times. However, market sources claim that Lloyds bank is currently "sounding out" institutional investors regarding a massive fundraising which could be announced in the short term.

While there is no doubt that the £15 billion which is being rumoured as the figure in mind would transform the company's balance sheet, is this the right time to invest in the UK banking industry?

The truth is that Lloyds bank has suffered a dramatic fall from grace having taken on the HBOS acquisition as a "favour" to the UK government. The business has produced more surprises than a magician's hat and more bad debts than even the UK government was aware. It is also interesting to see that market sources claim the company is "sounding out" investors, even though this particular practice recently attracted a censorship from the FSA for Dresdner bank. Is there a difference between sounding out investors about a potential bond issue and an equity issue?

Many people believe that the FSA has "opened a can of worms" with its pursuit of Dresdner bank about alleged "market abuse".

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