HBOS shares bounce back after hitting record low
Shares in HBOS bounced back this afternoon after prime minister Gordon Brown expressed his confidence that Lloyds TSB would take the bank over, despite recent concerns that the
deal might not go ahead.
Shares in the bank surged by 25% after the prime minister's statement of confidence in the deal, while shares in Lloyds TSB increased by 12%.
Earlier this morning HBOS shares fell to a record low amid speculation that Lloyds TSB was rethinking its £12 billion rescue deal.
The banking giant saw 26% of its value wiped out on Tuesday (30/09/08) as volatility rocked the market during morning trading. By early afternoon it was more than 10% down at 127.4p. In contrast, Lloyds TSB shares were given a boost, up almost 3% at 225p.
HBOS' stock slide came amid concern that the deal might not go ahead. Detractors warned that the deal would value the bank at £10.7 billion, well above its current market capitalisation of £7.5 billion. However, Standard Life has promised to back the rescue of the troubled lender on previously agreed terms.
A way of valuing a company by the total value of its issued shares and calculated by multiplying the number of shares in issues by the market price. This means the market capitalisation fluctuates continually as the value of the shares change in the market. For example, HSBC has 17.82bn shares in issue at a price of 646.2p making a market capitalisation of £115.15bn.