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Govt will not underwrite Lloyds cash call

The Government will not underwrite any rights issue by Lloyds Banking Group, according to the Financial Times.

The newspaper says sources close to the Government, which owns more than 43 per cent of the bank, have said it will not aid the bank to raise money amongst shareholders, in an attempt to avoid having to enter into the Asset Guarantee Scheme and lose further share of the business to the state.

One market insider told the FT: “If an investor with nearly 45 per cent . . . does not agree to underwrite an issue, it would send a pretty big negative message to the market.”

In April last year, the Government helped RBS with its £12bn rights issue, the biggest in UK corporate history. The FT says Lloyds would be looking to raise £15bn amongst shareholders.

Sources have told the FT that a rights issue at this time, of this size and by a bank like Lloyds relies on the Government giving a guarantee that it will buy up any remaining shares.

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