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Lloyds shares rise and investors to get £4billion share issue after chairman quits

18 May 2009 / by Rachael Stiles
Chairman of Lloyds Banking Group, Sir Victor Blank, is stepping down following the group's takeover of HBOS, which accounts for the majority of Lloyds' bad debts.

Lloyds Banking Group shares have risen 6.60p to 94.80p following yesterday's announcement.

"I believe it is the right time for the Group to appoint a new chairman," Sir Victor said in a statement, adding that the integration of Lloyds and HBOS "remains – in the medium term – a unique value-enhancing opportunity."

Sir Victor will continue working until a successor is appointed, but will leave before June 2010, the group has said.

The board hastily appointed Lord Leitch as deputy chairman with immediate effect, who will become senior non-executive director of Lloyds Banking Group at the forthcoming AGM.

Commenting on Sir Victor's impending departure, Lord Leitch said: "The Board was unanimous in wanting Sir Victor Blank to seek re-election as Chairman for another three years. We are very sad about Sir Victor’s personal decision to retire, although we respect and understand his reasons for it."

The group's 2.8million shareholders could benefit from potential profits of a subsequent £4billion share issue, after Lloyds confirmed Lord Leitch as its new deputy chairman, and reports have pegged him as a likely successor to Sir Victor.

The board may have appeared to remain loyal to Sir Victor, but he has announced his plans to leave amid speculation that shareholders were intending to vote against his re-election at the forthcoming AGM.

It is widely thought that Sir Victor's decision to leave was primarily a consequence of Lloyds' takeover of HBOS, after it ran into trouble last year. While this meant that the Government did not immediately have to intervene to save HBOS from collapse, it landed Lloyds with a 50 per cent increase in bad corporate loan debts, largely due to HBOS' losses.

And, ultimately, the newly formed Lloyds Banking Group still had to be bailed out by the taxpayer, which now owns more than 40 per cent of the bank.

With the new share issue, Lloyds will swap £4billion of preference shares for equity, and existing shareholders will be offered 0.6213 new shares at 38.43p for every share they already hold.

Should the rights issue raise more than expected, the extra funds will be paid to existing shareholders.

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