HBOS shareholders vote on £4bn cash call

Shareholders in Halifax Bank of Scotland were voting today on the bank’s request for an extra £4bn (€5bn) in capital.

HBOS, Britain’s biggest mortgage lender, is asking investors for the mammoth cash injection to help strengthen its balance sheet.

As with the UK’s other major banking groups, the high street giant has suffered multibillion-pound investment write-downs stemming from the credit crunch.

The group’s cash boost has been proposed through a rights issue, in which new shares are sold to investors at a discounted price of 275p to make them tempting for investors.

Shareholders who gathered in Edinburgh for a general meeting to discuss and vote on the scheme were given assurances by HBOS chair Dennis Stevenson that the move was about “old-fashioned prudence” and was the “fundamentally the right thing” for the business.

“The banking system has been living through a period of continued financial market volatility and turbulence,” he told the gathering.

“Today’s meeting marks a major step by our own company in seeking to achieve a step change in our capital strength.

“This is, by any standards, one of the more important moments in the history of the company.”

He said he was questioned earlier by a shareholder who demanded to know why the rights issue was needed when the company already has a strong balance sheet.

“The short answer is of simple old-fashioned prudence,” he said.

“None of us can predict the future but, as our board reviewed the world two months ago, we concluded that the world economy and, within it, the UK economy could be in for a far bumpier year or two than most commentators had foreseen even six months ago.”

He said the decision had not been taken lightly and added: “We have done it because we believe it’s fundamentally the right thing for our business.”