HBOS Announces Rights Issue

by Philip Morton, Investors Offshore.com

29 April 2008

The Board of HBOS plc has this week announced a rights issue to raise GBP4bn, in order to strengthen the HBOS capital base.

In a statement, the bank announced that:

"The Board is also establishing a new target Tier 1 ratio of between 8.0% and 9.0% and a new target core Tier 1 ratio of between 6.0% and 7.0%. These actions build on the Group's existing capital position and achieve a step change in capital strength."

It continued:

"The enhanced capital position will enable the Group to underpin its competitive position in its core markets and to pursue its strategy of:

• consolidating leadership in residential mortgages and savings;
• delivering measured and selective high value Corporate growth;
• continuing to grow strongly in Insurance & Investment; and
• investing in targeted International growth."

"These initiatives are being implemented against the backdrop of both the continuing financial market volatility and the more challenging UK macroeconomic environment."

Andy Hornby, Group Chief Executive, explained that:

"The actions we have announced today achieve a step change in our capital strength and our target ratios. This allows us to consolidate our competitive position in our core markets."

"We are planning for a more challenging environment ahead and the proceeds of the rights issue should ensure that we benefit from strong ratios even if the macroeconomic environment deteriorates further."

He concluded:

"In the long term we remain optimistic about the fundamental prospects for our core businesses. The Group will be well positioned to benefit over time from a number of selective growth opportunities across our businesses
where there will be scope to earn good returns."

"We are focused on achieving returns on equity in the mid teens and are well placed to deliver long term sustainable growth."

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