U.K. Stocks Rebound After Government Bank Bailout; Lloyds Gains

By Sarah Jones]

Oct. 13 (Bloomberg) -- The U.K.'s FTSE 100 Index rebounded from the worst weekly drop since 1987 as the government invested 37 billion pounds ($64 billion) to bailout three banks to avert a collapse in the financial sector.

Lloyds TSB Group Plc, the bank that agreed to buy HBOS Plc, gained 12 percent after saying HBOS will raise 11.5 billion pounds in new capital including a stake sale to the government. Barclays Plc jumped 13 percent after the lender announced plans to sell shares to private investors instead of turning to the government for help.

The FTSE 100 gained 208.79, or 5.3 percent, to 4,140.84 at 8:47 a.m. in London, recovering some of last week's 21 percent sell off, which was the steepest decline since the so-called Black Monday stock market crash in October 1987.

The FTSE All-Share Index added 5 percent to 2,113.53, while Ireland's ISEQ Index increased 4.2 percent to 2,991.68.

Royal Bank of Scotland Group Plc, HBOS, and Lloyds TSB will get an unprecedented bailout from the U.K. as governments across Europe act to avert a banking collapse.

Lloyds TSB rallied 12 percent to 212.25 pence after saying the government will underwrite the offering of 8.5 billion pounds in ordinary HBOS shares and will inject 3 billion pounds of preference stock.


Lloyds also cut the value of its offer to buy HBOS stock to 0.605 of a Lloyds share from the 0.833 offer for each Lloyds share made last month. HBOS shares fell 7.4 percent to 115 pence.

Barclays rallied 13 percent to 235 pence as the U.K.'s second-biggest bank said it plans to sell more than 6.5 billion pounds of shares to private investors without turning to the government for help. The lender won't pay a final dividend for 2008.

RBS, which was Britain's second-biggest U.K. bank before the shares collapsed last week, lost 4 percent to 68.8 pence as the lender ousted its chief executive and turned over control to the government.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.