ANDY Hornby's £6 million share-support move produced a £2.3 billion reward for HBOS last night after shares in the beleaguered bank rose a stunning 15 per cent in one day's trading.
Hornby led a group of 250 senior executives at the bank in investing in shares last Thursday in an attempt to boost HBOS's standing after it was rocked by stock-market rumours that it faced a financial crisis.
Last night the move appeared to ha
ve paid dividends, with HBOS shares gaining as much as 17 per cent, before falling back to an increase of just under 15 per cent when the market closed.
The 14.93 per cent increase to 544.5p was the largest share surge since the company was formed out of the merger of Halifax and Bank of Scotland in 2001.
It added £2.3bn to HBOS's market capitalisation, which stood at £17.7bn last night, and left the bank's shares well above their price before they were hit by the market rumours last Wednesday
Last night senior executives at Britain's biggest mortgage lender were trying to play down yesterday's surge. A spokesman for the bank said: "Our view has not changed. We believe that the market volatility will carry on for some considerable time yet."
However, in private it was clear that the mood at the Edinburgh-headquartered bank was a mixture of elation and relief.
Hornby last week mounted a massive public effort to reassure the markets, stating unequivocally that the bank did not have financial problems.
His public interventions were followed by the purchase by senior executives of about 1.4 million HBOS shares, at a cost of £6 million, on Thursday – a move revealed on Sunday. The executives had to wait until the markets opened yesterday, after the East Monday holiday, to find out if their gamble had paid off.
Within minutes of the markets opening, HBOS shares surged and retained their higher level for the rest of the day. The 15 per cent rise was five percentage points higher than the previous record for the bank, set in July 2002 when shares moved 10 per cent on the back of exception results.
HBOS was the biggest riser by far on the FTSE 100 index, which soared to a gain of more than 3 per cent. The London market was buoyed by the news of investment bank JP Morgan's improved offer for ailing rival Bear Stearns in the US on Monday. Other UK banks' shares rose yesterday, including Royal Bank of Scotland, which gained 30p to 351.25p, a rise of 9 per cent.
HBOS yesterday revealed further details of how it will assist the Financial Services Authority in its search for the rogue traders who sought to undermine its business with ill-founded rumours last week. HBOS said it would hand over its own detailed account of the unusual activity around its shares to the market watchdog to support the investigation.
More than £3bn was wiped off HBOS's value in less than an hour last Wednesday.
A bank spokesman said: "The regulator is in the driving seat on this inquiry. We're pulling together our understanding of what happened and will send that to the regulator and they will use it as they see fit."
The FSA declined to comment on individual shares but a spokeswoman said it will probably look at activity in banks going back to 12 March. There are likely to be three strands to the inquiry: technology will be used to signal where there was unusual "short" selling; analysts will look at any further unusual trades; and the regulator will talk to market participants.
SHOWING FAITH CAN PAYANDY Hornby spent more than £414,000 of his annual bonus last Thursday on 92,812 new shares in HBOS, which were then priced at 446.25p.
Yesterday the bank's shares closed at 544.5p, making the chief executive's stake worth more than £505,000 – a "profit" on paper of more than £90,000.
Hornby made the move to demonstrate his confidence in his business and is not expected to sell to make a quick profit.
He is not the first executive of an under-pressure business to demonstrate his confidence in his own company by buying shares.
It has become standard practice for senior business executives to show their confidence in their company by buying their own shares.
Yesterday Devro, the Scottish-based sausage skin firm, said its chief executive, Peter Page, lifted his stake in the company to 234,900 shares. Page bought 115,500 85.75p shares in the company which some see as under-performing.
In January, after flat Christmas trading figures, M&S chief executive Stuart Rose increased his holding by 50 per cent, investing more than £1 million.
Shares in Johnston Press staged a recovery earlier this month after the company announced a significant purchase of the stock by senior executives.
Five directors bought nearly 300,000 shares in the parent company of The Scotsman, pushing the share price up by 1 per cent to 125p, after it had earlier dipped by 4 per cent.
The full article contains 859 words and appears in The Scotsman newspaper.
