Scots banking giants suffer new lows

Published on Tuesday 15 July 2008 21:22

SHARES in Royal Bank of Scotland and HBOS fell to multi-year lows yesterday, as fears mounted about RBS's ability to sell its insurance division and HBOS was caught up in the woes from the mortgage market in the US.

RBS's shares fell 11 per cent before later recovering somewhat to close down 7 per cent at 167.3p.

The drop followed an 8 per cent fall on Friday after another potential buyer, Zurich Financial Services, had walked away on Thursday night from the 5-7 billion auction of the Royal's insurance division.

HBOS, whose 4bn rights issue closes this Friday, was said to be caught up in fears about the banking fallout in the US from the problems at mortgage agencies Fannie Mae and Freddie Mac.

HBOS's shares were off 7 per cent before later closing down 4 per cent at 260p – compared with a 275p-a-share rights issue price.

One City analyst said: "RBS is under the cosh because the sale of the insurance division does not seem to be progressing smoothly."

Analysts said there now also looked a risk that a significant rump of shares could be left with the underwriters in the HBOS share issue.