HBOS shrugs off concerns over level of shares take-up in £4bn cash call

HBOS yesterday shrugged off City speculation that a significant proportion of its shares will be left with the underwriters when its bumper £4 billion rights issue closes this Friday.

It comes amid reports that private client stockbrokers have been advising the Edinburgh-based bank's retail shareholders, who own about a quarter of the shares, to ignore the issue.

It is said this is partly due to the shares – which closed last week at 266.5p – being below the 275p rights issue price.

But an HBOS spokesman said: "We have never given an indication of the likely take-up of the rights issue. We will not do so until it has concluded."

It is believed that the HBOS board, led by chief executive Andy Hornby and chairman Lord Stevenson, have also been encouraged that 98 per cent of shareholders gave the move the green light at an extraordinary general meeting on 26 June.

One analyst said yesterday: "HBOS has a greater number of retail shareholders than virtually any other British company.

"As such, it could be that a rump of shares will be left with the underwriters. But the confidence damage from that could be overstated.

"After all, the cash call is taking place against the most tumultuous period in the market for many years.

"The bank would certainly argue that the depressed backcloth was as much to blame as anything else."

The issue is underwritten by Morgan Stanley and Dresdner Kleinwort. HBOS also said the position had not changed on possible asset disposals to raise additional capital.

There were weekend reports that leading investors had pressed Stevenson to consider selling business such as HBOS's Irish division – Bank of Scotland (Ireland) – the Insight fund management arm and its Australian operation BankWest.

National Australia Bank, which on Friday said it was interested in buying Royal Bank of Scotland's ABN Amro-inherited wholesale and investment banking division in Australia and New Zealand, would not comment on whether it was interested in BankWest.

HBOS sources said yesterday that at the time of the rights announcement the group said it had considered major disposals, but had decided against them.

Among leading institutions in the bank are M&G, Standard Life and Legal & General.

One of them said: "I think we are linked with this type of report because we are one of the bigger shareholders. But we would not comment on it."

• Leading City practitioners and regulators go to the Treasury today to discuss reforming the rights issue process in the wake of big cash calls coming under pressure through shares falling below the rights issue price.