HBOS falls below cash-call price as bankers plunge

Published on Wednesday 11 June 2008 21:33

LONDON FTSE 100 CLOSE 5,723.3 -104

HBOS, the Halifax/Bank of Scotland banking group, plunged below the value at which it is raising more cash from shareholders via a 4 billion rights issue.

The shares, which like most in the sector have fallen heavily in the past year, fell another 11 per cent, or 34p, to 258p – compared to a 275p rights issue price.

But the bank said its rights issue process was continuing as planned. A spokesman said the bank was "not for turning".

One banking analyst said: "HBOS may well take the view in the current major volatility that it is better to be in the queue (for rights issues] than sweating on the sidelines."

There has been speculation as to whether Barclays and Alliance & Leicester will announce rights issues following on from Royal Bank of Scotland, Bradford & Bingley and HBOS.

The wider London market plunged almost 2 per cent as fears over potential interest-rate rises spooked investors on both sides of the Atlantic.

London's FTSE 100 index of the UK's leading shares closed down 104 points at 5,723.3.

Royal Bank of Scotland also fell sharply despite issuing a trading statement that trading was in line with expectations. Shares in Scotland's largest company fell 21p to 212.25p.

Alliance & Leicester, one of four companies being dropped form the FTSE-100 as part of the latest quarterly reshuffle, closed down 29.25p at 318.75p.

But house builders fell harder than banks, on more negative analyst coverage.

A statement from Barratt Developments that trading remained in line with previous guidance did little to prevent a run on the group's shares.

Barratt was the worst performer of a group of mid-tier house builders, falling 21 per cent to 72.5p. Persimmon, which is also being demoted from the FTSE-100, fell 3 per cent to 376p.

Mid-tier Aberdeen Asset Management dropped 12p, or 9.2 per cent, to 118p, on fears for the value of its substantial property assets.

Retailers also dropped as Citigroup warned of the prospect of weak consumer demand this year.

FTSE-100 clothing retailer Next fell 81p to 1,016p while, in the second tier, Comet owner Kesa Electricals was down 10 per cent, or 19.25p, to 170.5p.

Electronics retailer DSG International, which owns Currys, was 8.5p worse off at 49.25p and Debenhams was 3.25p lower at 53.75p.

Aberdeen-based bus and train company FirstGroup was one of the few risers in London yesterday, despite rising oil prices threatening increase costs.

First held an analyst and investor trip in the USA last week and has benefited from several broker upgrades. Shares rose 12.5p at 515.5p.

Several utility companies also rose on improving prospects for the energy sector and as part of a flight to safety.

British Gas owner Centrica led the FTSE-100, adding 8.75p to 305p.