HBOS Board Meets Amid Rights Issue Talk

The board of Britain's HBOS meets on Monday amid growing speculation the mortgage bank is set to announce plans for a rights issue of shares of up to 4 billion pounds ($7.9 billion) to shore up its capital base.

Newspaper reports over the weekend, just days after Royal Bank of Scotland announced plans for a record 12 billion pound fundraising, said HBOS's board would consider raising between 2 billion and 4 billion pounds, though it could also decide to ride out the credit crunch without fresh funds.

The Financial Times said on Monday that Britain's largest mortgage lender -- due to report on current trading on Tuesday, before its annual shareholder meeting -- was now finalising its plans to tap investors for fresh capital.

Analysts have long said HBOS, which has one of the more stretched capital ratios among UK banks, could have to raise cash to bolster its balance sheet.

They have also estimated the bank could take further writedowns of up to 3 billion pounds, hit by the deteriorating value of toxic assets including below-prime Alt-A mortgages.

At its full-year results, HBOS announced writedowns of just 227 million pounds.

HBOS brokers Morgan Stanley and Dresdner Kleinwort are expected to at least partly underwrite any rights issue.

Last week, HBOS said a 9 billion pound residential mortgage-backed security deal would provide it with a more diverse and flexible funding base.

HBOS was not immediately available for comment on Monday.

HBOS shares closed 0.3 percent lower to 495.75 pence.