HBOS soars on Spanish rumours

Published on Wednesday 23 July 2008 21:13

SHARES in HBOS leapt 16 per cent yesterday as speculation that the Edinburgh-based bank was being stalked by Spanish bank BBVA swirled through the stock market.

HBOS's shares closed up 44p at 305p, well above the 275p price offered to shareholders in the bank's just-concluded 4 billion rights issue flop that was only taken up by 8 per cent of investors.

The rise added 2.3bn to the group's stock market value. Shares in HBOS have now risen 35.6 per cent above the 52-week low of 222.25p struck on Wednesday of last week.

HBOS would not comment yesterday, but it is understood it has received no approach from BBVA. The Spanish bank would not comment.

The rumoured interest in HBOS, Britain's biggest mortgage lender through Halifax, comes a week after Spanish banking giant Banco Santander made a recommended 1.25bn takeover bid for Alliance & Leicester. Santander already owns Abbey in Britain.

Commenting on the HBOS speculation, one City analyst said: "It is difficult to call. You would not say it had a lot of strategic logic for BBVA. But you cannot rule anything out bearing in mind how distressed UK banking share prices are."

Another analyst said: "BBVA certainly has the strength to do it. Its market capitalisation is about 46bn (36bn) compared with HBOS's 19bn.

"But there could be one or two other reasons for the price spike. Hedge funds are known to be closing their short positions, which will drive the HBOS price up."

BBVA serves 35 million customers but is focused on the Spanish and Latin American market. It has been present in London since 1918 but has only three branches there.

Some believe yesterday's share price spike at the Scottish 2 bank may also have been part of a general sector rebound.

RBS and Barclays both put on 11 per cent yesterday, while Lloyds TSB climbed 8 per cent.

The HBOS rights issue left lead underwriters Morgan Stanley and Dresdner Kleinwort with about 2.6bn in shares snubbed by investors.

On Monday they placed 29 per cent of that overhang with investors.