BANK SHARES FALL AS LLOYDS TESTS MARKET
SHARES in Lloyds and Royal Bank of Scotland fell yesterday on fears that this week’s break-up of Dutch bank ING by European regulators is an example of how UK banks that have accepted state aid will be treated.
Meanwhile, chancellor Alistair Darling looks set to give Lloyds the go-ahead to market-test its plan for a massive £25bn refinancing to see if there is investor appetite.
He is likely to tell the bank within a week that it can formally appoint underwriters and test the market.
Lloyds, in collaboration with underwriters lined up at UBS and Bank of America Merrill Lynch, has been working for weeks on the plan – which would combine a rights issue of £11bn-£15bn with the conversion of up to £10bn of existing debt into equity.
Lloyds, led by chief executive Eric Daniels, is desperate to avoid using the government’s Asset Protection Scheme (APS) to insure risky assets, as this will raise the government’s 43.5 per cent holding in the bailed out bank to around 60 per cent.
Shares in Lloyds Banking Group fell five per cent to 80p yesterday, while RBS stock fell three per cent to 39.6p.