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Lloyds shares continue to climb as cash call is confirmed

30 October 2009 / by Rebecca Sargent

Shares in Lloyds Banking Group continued to climb this morning, following yesterday's announcement confirming the Groups' capital raising intentions.

Following mounting speculation over Lloyds' plans to exit the Government Asset Protection Scheme (GAPS), the bank revealed yesterday, "Lloyds is in advanced discussions with HM Treasury, UK Financial Investments and the Financial Services Authority regarding alternatives to participation in GAPS."

Lloyds shares passed the 90p mark this morning, as it revealed plans for substantial capital raising in the form of a rights issue and the exchange of certain existing Group capital securities.

However, to exit the Asset Protection Scheme, it is expected that Lloyds will have to pay a fee of between £1billion and £2billion.

Since Lloyds merged with HBOS last year, the newly formed Lloyds Banking Group has been forced to accept Government support, and is currently 43 per cent state controlled, which may be why Lloyds is attempting to avoid the Government's insurance scheme for toxic assets.

In addition to these latest capital raising plans, Lloyds has also revealed plans to sell the majority of its investment management activities, in addition to the sale of Halifax Estate Agencies, and a number of restructuring plans that have seen thousands of jobs lost.

But, despite these moves, the Group, "is confident that the final terms of its restructuring plan, including any required divestments of assets, will not have a material impact on the group."

It is expected that the rights issue will be placed on the market as early as next week.

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