Lloyds faces angry shareholders after HBOS takeover

Lloyds Banking Group will today face shareholders amid mounting anger over its HBOS takeover as the final deadline for investors to take part in its £4bn (€4.5bn) fundraising looms.

The group – which is 43.4% owned by the British government – is in line for a bruising meeting in Glasgow following its decision to take over ailing rival HBOS in last autumn’s dramatic rescue deal.

HBOS made losses of almost £11bn (€12.5bn) last year after its reckless lending was exposed by the recession, and Lloyds will plunge into the red this year as a result.

Although investors in both banks supported the takeover last year, a new company called Lloyds Action Now will be launched at the meeting to explore grounds for legal action by shareholders in the former Lloyds TSB against the directors of the two banks and their advisers.

Lloyds is putting £260bn (€294bn) in toxic assets – mostly from HBOS – into a taxpayer-backed insurance scheme to shore up its finances.

Lloyds appeased shareholders recently with news that chairman Victor Blank - seen as the public face of the takeover – is stepping down next summer.

But investors could use the meeting as a chance to signal protest at the deal when voting on Blank’s reappointment for the period leading up to his departure.

They will also have until midday to take part in the multi-million pound share placing, designed to convert the preference shares owned by the British government into ordinary shares.

The results of the vote – expected early next week – are crucial for the bank, because if all other shareholders snub the issue, it could end up owning 65% - although this is seen as unlikely.

Previous share offers by banks needing government support have been turned down by investors because the price has been well above the market value.

This latest move should receive more support because the shares are being offered at 38.43p – a significant discount to the current share price.

However, with bank shares being seen as a risky investment amid the current volatility, many may rather opt out and wait instead for a possible compensatory cheque to arrive later in the summer.

Lloyds has about 2.8 million private investors, but they only make up around 9% of the shareholder base.

This will mean any votes protest at the AGM is unlikely to give the bank too much of a headache.

UK Financial Investments – the government body charged with overseeing state-owned bank stakes – has already said it will back all resolutions in a sign that any revolt is likely to be on a small scale.