London - Britain's biggest mortgage lender, the Halifax Bank of Scotland (HBOS), Tuesday became the second leading bank to ask shareholders to bolster its finances in the wake of the credit crunch. The Glasgow-based bank said it needed to "consolidate its competitive position" through a rights issue totalling 4 billion pounds (8 billion dollars).
Under the scheme, the bank's 2 million shareholders will be offered two new shares at 275 pence for every five held.
The bank also announced write-downs of 2.8 billion pounds as a result of losses on investments linked to the US sub-prime mortgage market and the global squeeze on credits.
HBOS finances one in five mortgages in Britain. It was formed by the merger of the Halifax Building Society and the Bank of Scotland in 2001.
Last week, the Royal Bank of Scotland (RBS) made a 12-billion- pound cash call to shareholders as the government called on leading banks to "come clean" on the true extent of their sub-prime-related losses.
"Trading conditions in the first quarter of the year have been challenging against the backdrop of global financial market dislocation that is now impacting on the wider economy," HBOS said in a statement.
The extra funding would allow it to grow internationally and invest in its residential mortgage and savings business and provide "financial resilience in challenging economic circumstances."
Analysts have predicted that more British banks will follow the example set by RBS and HBOS to raise capital through rights issues, a step openly encouraged by the Bank of England.
Among those named is Barclays' Bank, which recently blamed "tough market conditions" for a decline in first quarter results, as well as a number of smaller lenders.
