HBOS announced its two-for-five rights issue in April this year, planning to raise £4 billion by issuing rights at 275p a share. But the general decline of the banking sector pushed HBOS below this mark for most of last week, though its shares strengthened again on Friday. Only 8.3% of the rights were taken up, the bank announced today, leaving underwriters Dresdner Kleinwort and Morgan Stanley with over £3.6 billion in unsold shares to place by close of business tomorrow.
The Barclays placing, announced on June 25, did little better, with shareholders taking up only 19% of the shares on offer. The rest of the £4 billion in new shares will go to various large institutions - Qatar Investment Authority, the Qatari Challenger investment fund, China Development Bank (CDB), Singapore's Temasek fund and the Japanese Sumitomo-Mitsui Banking Corporation (CDB and Temasek are already Barclays shareholders).
Meanwhile, Citigroup announced $2.5 billion losses for the second quarter of 2008, driven by writedowns of $3.4 billion on exposure to US subprime mortgages, $2.4 billion on monoline exposure, $545 million on exposure to commercial real estate and $428 million on leveraged finance exposure. The markets welcomed the news, which came in below analyst expectations of over $8 billion in writedowns.
The news reflects the growing belief that the global credit crisis is still far from over - interbank borrowing costs are still significantly higher than swap rates (the Libor-OIS spread) and major investment banks continue to report writedowns and losses from exposure to the subprime mortgages and monoline bond insurers at the heart of the turmoil.
The week on Risk.net, July 7-13, 2018Receive this by email