Lloyds plans a 12.5bn share issue
LLOYDS Banking Group will turn to traditional investors rather than a sovereign wealth fund to help it raise up to £25bn to exit the government’s Asset Protection Scheme (APS), City PM can reveal.
Sources familiar with the bank’s plans said last night that it had submitted a proposal to the Financial Services Authority (FSA) that would see it raise up to £25bn, around £12.5bn in a cash call and the remainder in “a variety of other instruments”.
The source said the bank was confident it could raise the funds necessary to ditch the scheme, but said it would not mimic rival Barclays, which went to Middle Eastern wealth funds for investment last year as an alternative to government recapitalisation.
The bank will instead call on “traditional investors” for the funds and hopes to convince the FSA that the plan will leave it sufficiently well-capitalised to abandon its use of the costly APS.
Under the current arrangement, Lloyds would pay £15.6bn in non-voting ‘B’ shares to insure £260bn of toxic assets, raising the government’s stake from 43 per cent to 62 per cent.
Lloyds will also have to reduce its market share of current accounts by some five per cent to around 25 per cent in order to secureEU approval for its use of state aid, sources close to the bank said.