Lloyds gets support for a cash call
LLOYDS Banking Group executives believe they have secured sufficient appetite from investors for a share placing that would allow the bank to reduce its participation in the government’s costly Asset Protection Scheme (APS), City PM can reveal.
The bank has been sounding out selected investors over the past few weeks and has received assurances that it could successfully bolster its capital base with a placing, reducing reliance on the APS, sources familiar with the bank’s range of options said.
The source said the APS was highly unlikely to close on the original terms, adding that a range of options were under discussion, including paying for the scheme entirely in cash and exiting altogether.
Chief executive Eric Daniels is keen to see that the government’s stake does not rise above 50 per cent from its current level of 42 per cent, a barrier that would certainly be breached under the current terms.
The existing agreement would see Lloyds insure £260bn worth of assets, in return for ‘B’ shares worth £15.6bn, raising the taxpayer’s stake in the bank to around 62 per cent.
Analysts, including Credit Suisse’s Jonathan Pierce, believe a cash call of around £6bn would allow the bank to halve its use of the APS, ahead of the arrival of former Citigroup chair Sir Win Bischoff’s as chairman on 15 September.