HBOS chiefs face shareholders as rights issue rumours sweep City

Published on Monday 28 April 2008 21:11

ANDY Hornby, the chief executive of HBOS, will today face hundreds of private shareholders at the bank's annual meeting in Glasgow as he sets out plans to ride out the credit crunch.

Hornby and HBOS chairman Lord Stevenson are likely to field tough questions at the AGM in the city's SECC, following reports that the bank was set to unveil a rights issue to tap shareholders for up to 4 billion.

A trading statement was due to be released to the stock exchange at 7am today ahead of this morning's meeting.

HBOS has about two million private investors – the highest number of any UK plc. Around 500 shareholders were expected to attend the event. A total of 157,000 of the bank's investors live in Scotland.

Speculation regarding a rights issue at HBOS comes just a week after Royal Bank of Scotland called on shareholders for 12bn to improve a balance sheet weakened by credit crunch-related losses and the acquisition of Dutch bank ABN Amro last year.

HBOS, which has consistently refused to comment on the reports, was understood to be discussing the plans at a board meeting yesterday. The bank could also unveil up to 3bn in fresh losses on mortgage-backed bonds and investments hit by the credit crunch.

The bank's 227 million hit last year is so far relatively small compared to the billions suffered by RBS and Barclays. But HBOS also has a 7bn exposure to so-called "Alt-A" investments – based on a wider range of mortgages than high-risk "subprime" lending – which could be marked down in value.

The trading update is also likely to reveal a turbulent start to 2008, as the bank's shares have fallen by nearly a third.

Last month, false rumours swept the City that HBOS was facing a funding crisis, prompting financial watchdogs and the Bank of England to make an unprecedented intervention scotching the rumours.