LLOYDS PUSHES ON WITH PLAN TO RAISE 21BN
LLOYDS Banking Group will retain a 25 per cent share of domestic current account customers under restructuring plans agreed with the European authorities to avoid the government’s asset protection scheme (APS).
The European Commission and the Treasury last night gave the bank the go-ahead to market a £20.5bn capital raising programme, consisting of a £13bn rights issue alongside £7.5bn of contingent convertible bonds.
The move ends eight months of uncertainty over the future of Britain’s second biggest bank after Lloyds said in March it planned to put £260bn of loans and investments into the APS, the government-backed insurance scheme
Approval for the fundraising came only after an agreement had been reached in principle for Lloyds to pay a penalty for being bailed out with state aid.
The bank hopes to finalise paperwork and announce plans within days in order to raise the money before Christmas, in what could be the biggest rights issue ever launched.
Sources said that the group’s rights issue, which was being tested on investors yesterday, could be priced at a deep discount price of as little as 30p.
The bank, which is 43 per cent owned by the UK taxpayer, is understood to have agreed the sale of TSB branches in Scotland, Intelligent Finance, its internet banking arm, and Cheltenham & Gloucester.
Investors are likely to be pleased with the modest size of the disposals as the stock market had feared Lloyds would be forced to make more significant divestments.
An announcement from Dutch bank ING on Monday that it would be broken up caused panic that the EU would impose similar measures on Lloyds.
But it is understood the primary focus of the negotiations has been to ensure the banks were fully capitalised.
Lloyds currently has 30 per cent of domestic current account holders and there had been concerns it would be forced to drop to 20 per cent.
The disposals can be made within the next five years but it is understood the EC would demand faster results if there were willing buyers around.
Shares in the group jumped 7.5 per cent – up 6p to 86p ?– yesterday on hopes the deal could happen before the end of the year. In a statement released earlier yesterday, Lloyds said it was “confident that the final terms of its restructuring plan, including any required divestments of assets, will not have a material impact on the group”.
Under the APS, the government insures for a fee some expected future losses on investments made by the banks.