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Lloyds finalises capital plan

Source: Reuters - Thu 29th Oct 2009

Lloyds has finalised plans to plug a capital gap of more than 20 billion pounds, sources familiar with the situation said. Its shares rose on hopes that a deal could happen before the year's end.

Shares in Britain's biggest retail bank have sagged in the last few days on fears that this week's EU regulatory-induced break-up of Dutch bancassurer ING would set a precedent for Lloyds, which is 43-percent owned by the government.

But by 9:09 a.m. on Thursday, the stock was up 5 percent at 84.02 pence, outperforming a 1.12 percent stronger DJ Stoxx European banking sector index .SX7P.

"Lloyds has understandably bounced back on expectations that the government has backed its capital-raising plans after recent sharp falls. It will be a relief when they can get it away" said one trader.

Lloyds declined to comment.

The plans include a rights issue of 12 billion pounds and contingent capital of 7 billion pounds the sources said, in line with earlier Reuters reports.

It has also lined up a mandatory convertible of 2 billion pounds and a series of "management actions" agreed with UK regulator the FSA, the sources said, such as cost cuts and a reduction of risk-weighted assets.

Lloyds is facing a crunch time for its capital plans, sources close to the matter told Reuters last week, hoping regulators would decide this week to allow it to drop out of the government's planned asset protection scheme to insure toxic debt, for which it signed up in March. 

That would enable it to complete its rights issue in December, its preferred time frame, the sources said.

"Discussions with Lloyds are on going, no decisions have been made" a Treasury official said on Thursday.

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