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HBOS 'considering rights issue'

The UK's biggest bank is reportedly considering a rights issue to shore up its balance sheet in the wake of further sub-prime-related losses.

Shareholders are expected to be informed of plans for a $4 billion issue later this week following a meeting of the board today, the Financial Times reports.

The rights issue is likely to be partially underwritten by brokers Morgan Stanley and Dresdner Kleinwort.

A further credit crunch-related loss of $6 billion is also expected to be announced - following write-downs of $500 million declared by HBOS in its latest full-year results.

This is thought to be due to the declining value of the bank's Alt-A portfolio - a category of loans between prime and sub-prime.

The speculation follows the $20 billion-plus rights issue announced by rival mortgage lender RBS, which has a similarly stretched balance sheet to HBOS, last week.

HBOS has yet to comment on the rumors.