HBOS is expected to confirm tomorrow that investors have shunned its £4bn rights issue with as few as 10-15% acquiring the new shares.
With the shares trading below the 275p issue price in the run-up to Friday's deadline, the vast majority of shareholders chose not to buy the new stock or else buy shares more cheaply in the market.
But the bank will put a gloss on the flop by say
ing that it came during the most turbulent period in modern banking history and that other banks are sharing the pain.
HBOS is guaranteed to get the new capital from Dresdner Kleinwort and Morgan Stanley, which have underwritten the issue, and they can still make a profit following a shares rally on Friday after the issue closed.
Investors will be left nervously waiting for the rally to continue or for the new shares to be dumped on the market, causing the price to fall again.
The disappointing result for the Edinburgh-based bank follows a sharp fall in its shares which have been pummelled by the credit crunch and short sellers who borrow stock in the hope that it falls so they can buy it back more cheaply.
The banks have been among the biggest casualties of the recent bear market which has wiped billions off the value of all bank stocks. HBOS shares have fallen 40% since it announced the rights issue in April.
Barclays shareholders also failed to support a cash call, with only 19% participating in the £4.5bn offering.
There was some hope for investors as the bank rally helped the FTSE 100 record its first weekly rise since the middle of May.
The full article contains 286 words and appears in Scotland On Sunday newspaper.
