HBOS rights issue: Nailing the blame game
HBOS is now the UK’s second-biggest mortgage lender after Spanish-owned Abbey claimed 25% of the market in the first half of 2008. The Scottish bank is trading well below book value, and reported in its half-year results, a drop in profits of 58% year on year. A £4 billion ($8 billion) rights issue fell flat with all but 8% of shareholders (see Bank rights issues: A right mess of issues, Euromoney, August 2008), and there are hefty funding requirements. Over the next 12 months, HBOS has more than $20 billion in corporate bonds, securities and medium-term notes reaching maturity.
As a result, there has been a lot of talk about a possible break-up of the bank, with names such as JPMorgan, Santander and National Australia Bank being floated as possible consortium members in an ABN Amro-style break-up. But many market participants are sceptical that such a deal will materialize. Although Santander has shown its UK market credentials with the performance of Abbey, and NAB would welcome HBOS’s Australian arm, it is considered unlikely that any will want to take on HBOS’s balance sheet difficulties. "The biggest hindrance for anyone looking at HBOS is funding its balance sheet," says a banker familiar with the troubled lender.