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Foreign Investment: Should HBoS follow Royal Bank of Scotland’s lead?

Posted April 28, 2008

“That’s a huge amount of money. It’s so large that it’s tough to get a handle on just how much money it is. Let’s just say that if a company with a market capitalization of £12bn was added to the FTSE 100 this morning, it’d slot in somewhere around the top 30.” — John Stepek

Blogger’s note: The U.S. isn’t the only market experiencing a financial crisis. Banks in the UK drank down subprime debt like sailors on leave. And now they’re having a difficult time staying afloat.The Bank of England has made a few gestures toward those banks in the worst trouble, but, unlike its American counterpart, it hasn’t been eager to patch the country’s financial boats. Without a government bailout on the agenda, the Royal Bank of Scotland just offered a record number of rights issues to its investors to make up for its mortgage losses. Find out why John Stepek of MoneyWeek says HBoS (HBOS: London), Britain’s largest mortgage lender, will be the next bank to put its hand out to its investors.

by John Stepek

Baltimore – (TFN): Last week, the Royal Bank of Scotland (RBS: London) announced its record £12bn rights issue.

That’s a huge amount of money. It’s so large that it’s tough to get a handle on just how much money it is. Let’s just say that if a company with a market capitalization of £12bn was added to the FTSE 100 this morning, it’d slot in somewhere around the top 30, near Cadbury Schweppes and Scottish & Southern Water.

Foreign Investment: Market reaction

In that light, the reaction to the fundraising so far has been pretty positive. It won’t feel like that to RBS chairman Sir Tom McKillop, nor chief executive Sir Fred Goodwin, but they can’t expect an easy ride, and to be fair, no one’s lost their job yet.

Moreover, the market seems to have welcomed the idea that at least the bank might be drawing a line beneath its problems. Uncertainty is something the market can’t bear, so the prospect of some stability makes even £12bn seem a price worth paying. Read on to learn why HBoS should issue rights of its own.

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Posted by John Stepek · Filed Under International Investing 

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