HBOS rights issue approved despite 'horrible' share-price performance

HBOS received resounding support for its controversial cash call yesterday, while the chairman of the board admitted the bank's share-price performance was "horrible".

Shareholders, including a majority of private investors, voted for the bank's £4 billion rights issue, with all three resolutions attracting yes votes in excess of 98 per cent.

However, shares in HBOS slumped 5.5 per cent to 276p, within a whisper of the discounted 275p rights issue price amid a wider market sell-off that saw the FTSE 100 index plunge almost 3 per cent.

Although most shareholders had placed their vote in favour of the rights issue before the meeting held at Edinburgh's international conference centre yesterday, as many as 300 came to grill the board before deciding whether to take up their rights.

Chairman Lord Dennis Stevenson gave a robust performance answering a string of questions, while chief executive Andy Hornby delivered a statement defending the bank's "satisfactory" performance and fielded some questions.

Unlike the Royal Bank of Scotland meeting in May where shareholders voted on RBS's £12bn rights issue, HBOS shareholders did not call for resignations from the board, nor did they demand apologies.

One shareholder, citing Hornby's background as former managing director of Asda's George line of clothing, did query whether the board had sufficient banking experience.

Stevenson replied: "If you look at our executive board, all but two of them have been commercial bankers. There is a lot of talk about the chief executive being a retailer; he has five years in retailing, ten years as a banker. It is not exactly unexperienced."

However, Stevenson admitted that the share price, which has lost 75 per cent of its value in the past nine months, was poor. "I did not say everything was fine. Our share price is not fine at all. It is horrible."

After the meeting, Stevenson was not able to respond to concerns the bank would have to shed jobs, although he could not rule them out.

He told The Scotsman: "The short answer is we have to do what is right for the majority of people working in the business.

"I hope we have what I call a culture of humanity at the top of the business, which doesn't mean to say we'd be soppy or wimpish, but we do the right thing and we do it decently."

Neil Forest, a shareholder and a consultant, said the board had won his confidence. "They did OK. Some great questions though; I was pleased to see them tested.

"I still have a decision to make on buying shares. If those guys hadn't performed today I'd have said there was no way I would buy them. If the price is right I will give them the benefit."