Lloyds rights issue won't be backed by Government

Lloyds rights issue won't be backed by Government

There is growing uncertainty over Lloyds Banking Group's planned rights issue after a report today indicated that the government would not underwrite the issue if the bank goes ahead with plans to raise money independently.

The government is understood to have told the bank that it would definitely not make a commitment to pick up any shares that are left over after the issue, according to an article in the FT.

If the government will not underwrite any issue, Lloyds will have to either find another group - such as an investment bank - to provide a safety net in the event that some shares are not snapped up.

The news will hamper the semi-state-owned bank's attempts to exit the government's Asset Protection Scheme (APS) and go it alone. The group said last month that it was considering a number of alternatives to entering the APS.

Lloyds declined to comment this morning, while the Treasury could not be contacted. The government - which owns 43% of Lloyds - is still expected to take up its actual rights if the bank does go ahead with any issue.

There has also been wide-ranging speculation that the group will sell off a number of assets in order to raise capital to shore up its balance sheet.

Today, Lloyds confirmed it was in talks about the potential sale of its non-core private client discretionary investment management business, principally the Bank of Scotland Portfolio Management Service, to Rathbone Brothers.

No figure has been arrived at and discussions are ongoing.

Shares in the group were seen higher early on, up 1.14p to 94.2p by 08:53am.

citywire.co.uk