HBOS chiefs buy up £6m in shares

A GROUP of the most senior staff and directors has invested more than £6 million in shares in HBOS in an effort to demonstrate their confidence in the bank and bolster its stock market standing.

The managers and executives purchased approximately 1.4 million shares last Thursday, the day after a series of "lies and malicious rumours" sent stocks in the Edinburgh-headquarted institution plummeting. Between them seven executive directors of the bank, including chief executive Andy Hornby, invested nearly £1.2 million in the shares.

Led by Hornby, the mass acquisition is a bold move aimed at further restoring the standing of the bank in the City.

Hornby spent £413,941 of his annual bonus on more than 92,812 shares, according to figures released by HBOS yesterday. HBOS spokesman Shane O'Riordain last night provided an emphatic justification for the move. "This is a straightforward demonstration of the confidence our senior managers have in the group," he said. "HBOS is a very strong business."

The shares were bought on Thursday, when the price had recovered most of its value on the back of the announcement of an investigation by the Financial Services Authority into alleged "short-selling" of HBOS stock on Wednesday. Last night, well-placed sources said that the move not only proved the commitment of the senior staff to the bank but was also a signal to the City.

A source said: "There is an important message to the City in this. The City will appreciate this move for what it says about the bank."

HBOS has always encouraged its senior staff to hold shares in the company. Its executives now have between three and four times their annual salary worth of shares – higher than the stake that executives have in most other UK banks.

In the statement released yesterday, HBOS said that senior management – also including chief executive of corporate affairs Peter Cummings – bought extra shares in Britain's biggest mortgage lender on top of the holdings they already have.

Jo Dawson, the chief executive of insurance and investment who is also in charge of the retail side of the business joined in the move, made just 24 hours after the bank was forced to dismiss rumours that its balance sheet was in trouble.

Colin Matthew, the treasurer of the Bank of Scotland, also took a sizeable new stake in the business.

In total, executive directors, non-executive directors and senior managers at HBOS bought some 1.4 million shares in early trading last Thursday at 446¼p per share using their bonus entitlements to pay for them.

The move takes Hornby's total number of shares in the bank to 721,598. Cummings now holds 190,755, Dawson 173,298 and Matthew 433,731.

HBOS, whose shares bore the brunt of the impact of the rumours which also hit other banks last week, was forced to dismiss Wednesday's speculation as "malicious" and "lies". It was also forced to counter the rumours by saying that it had an "exceptionally strong balance sheet" and continued to access wholesale funding.

HBOS shares rallied later on Wednesday after the FSA said that it was launching an investigation and the Bank of England took the unusual step of stating that it had not given HBOS emergency funding. The bank's shares rose further last Thursday, closing up 6 per cent at 473¾p per share ahead of the long Easter holiday weekend.

Bank chiefs will hope that the move will result in a further recovery of the share price when the London markets open tomorrow morning.

INTERNAL INQUIRY
A HIGH-FLYING former City trader might be appointed by HBOS to conduct an investigation for the company into the allegations of a concerted attempt to undermine the value of the bank's shares.

Richard Wyatt, a former executive with Panmure Gordon, has been approached by Lord Stevenson, HBOS's chairman, to see if he would lead the inquiry.

The bank wants Wyatt, or another senior figure with similar experience, to come up with evidence that it can submit to the Financial Services Authority.

An investigation into the events that shook the bank last week has already been ordered by the FSA. Well-placed sources last night revealed that HBOS was considering appointing an "internal adviser" to spearhead its own inquiry.

A spokesman for HBOS said: "We're putting together urgently a comprehensive briefing to pass to the FSA.

"Clearly, the FSA is very much in the lead. We are simply helping them with their inquiries."

It is understood that the FSA is using sophisticated software to try to trace the buying and selling of shares last Wednesday.

The regulator will be able to trace the companies who did the trading, but will have more difficulty in finding out who instructed the investment bankers to make the trades.