Britain's Lloyds Banking Group has not canvassed major investors over a potential rights issue to reduce dependence on a government-backed insurance scheme for bad loans, a top 15 shareholder said. "Lloyds has not been in contact with any of the major shareholders. I am sure Lloyds are thinking about it, but there hasn't been any contact," the investor, who requested anonymity due to the sensitivity of the issue, told Reuters on Wednesday.
A source close to the situation said separately that Lloyds, which raised 4 billion pounds ($6.5 billion) from shareholders earlier this year, was not in active talks with its investors to prepare a fresh cash call. Lloyds, 43 percent owned by the UK government, agreed earlier this year to include 260 billion pounds of risky assets in the UK's Asset Protection Scheme, but signs of an improving economy and optimism over its first-half earnings have prompted questions over its participation.
Industry sources told Reuters last month that Lloyds, 43 percent owned by the UK government, was gauging appetite for a rights issue of as much as 20 billion pounds to allow it to reduce reliance on the government and avoid 15.6 billion pounds of fees to take part in the scheme.
But the bank has met with lukewarm support. The Guardian newspaper said on Wednesday that "important City shareholders" would support a plan by the bank to raise 10 billion pounds ($16.32 billion), but investors said they would not immediately back a rights issue. "I think they've got a way to go before they build up credibility again. I don't think they are in a position to come to the market anytime soon," one top 20 investor said. The top 15 shareholder added: "There are few hedge funds stirring it up.
"We have to be to clear as to why they are doing it. We have to see the benefits relative to the APS which we don't know yet," the shareholder said. Lloyds declined to comment. Shares in the bank were trading down 4.5 percent at 1003 GMT at 101.2 pence, in a weak trading day across the financial sector.
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