STRANGE times in the UK banking sector. Major cash-raisings from existing shareholders and foreign investors; a £1.3 billion recommended takeover of one well-known high street name, Alliance & Leicester amid a chronic (in every sense) credit crisis;
and 5 and 10 per cent daily swings in topsy-turvy banking stocks now almost becoming the norm.
Banking boring? Nah. The odds have narrowed sharply on a major rump of the £4bn of new shares being issued by HBOS being left with the underwriters, Morgan Stanley and Dresdner.
Organised shorting of the stock by hedge funds and other professional investors did nothing to help HBOS get the issue away.
The destabilisation of this and other recent cash calls – RBS and Bradford & Bingley come to mind – led the Financial Services Authority to intervene with a new ordinance for greater transparency of short positions in extended rights issue situations.
For too long during the rights period HBOS's shares in the market were below the issue price as a result of this shorting, as the hedge funds committed to sell stock they did not own to drive the price lower and make a profit.
A no-brainer, then, for private investors in particular, in deciding whether to exercise their rights. Small shareholders may be laymen in these recondite matters, but they sussed out that they risked being hung out to dry while the multi-billion pound hedge funds got richer.
The HBOS deadline passed yesterday, and the bank says it will only reveal the level of take-up (perhaps, more pertinently, the level of the rump) on Monday.
Fortuitously, rival Barclays yesterday gave a foretaste of what we can be virtually certain to find after the weekend. Barclays revealed that in its own recent cash-raising exercise, dominated by Middle East and Far East share-placings, existing shareholders only took up 19 per cent of the new shares.
This makes it very likely that HBOS will also get this level of take-up at best.
With its army of two million small shareholders, HBOS was always much more vulnerable to a cold shoulder being given to the new shares on offer.
Traditionally, private investors are not as supportive of rights issues as the institutions.
And this time round the man in the street was being asked to stump up more than a few hundred pounds on average to take up his rights at a clearly worsening time for the general economy.
The crazy-mirror world of banking at present was also mirrored yesterday by the strong bounce in UK banking shares (alas too late to help HBOS's issue in any way). HBOS put on 5 per cent, while RBS, Lloyds TSB and Barclays all leapt 10 per cent on "relief" that American banking giant Citigroup had made "only" a $2.5bn second-quarter trading loss.
A major bank loses billions and its peers put out bunting.
Thank heaven for a $2.5bn loss at one of the biggest banks in the world.
Phew, for a while it looked like the sector was in a bit of trouble.
KIER Group will be thanking its lucky stars that, in construction, it is not simply a one-club golfer.
The company revealed yesterday that the pressures facing its housebuilding division were such that it is to axe 60 per cent of its staff – a colossal 375 of its 625 residential-build payroll.
This includes an unspecified number of job losses in Scotland where Keir employs 115.
On the other hand, the company said its other market areas of general construction and support services are still going great guns, both with record order books.
As a result, the group's shares jumped nearly 6 per cent yesterday to 965p.
It was precisely what the market wanted to hear – two divisions still performing well and robust action to deal with the division under pressure.
David Phillips, construction analyst at broker Landsbanki, was typical of the sanguine City reaction to what Kier had to say.
He is staying with his previous annual pretax profit estimate for the company of £86m, compared with the £77.6m posted the year before.
Phillips said: "Given the ongoing deterioration in the residential housing and commercial property markets, we think this represents an extremely creditable outcome and demonstrates the strength of Kier's balanced, cash-rich business model."
The full article contains 735 words and appears in The Scotsman newspaper.
