Senior HBOS Staff Reiterate Their Confidence By Picking Up Fallen HBOS Shares

High-ranking staff at HBOS including its chief executive, Andy Hornby, and its corporate lending business head, Peter Cummings, among other executive directors, went on a 6 million pound shopping spree to buy fallen HBOS shares a day after the infamous rumor filled day, which saw the banks shares crashing down by 17% in a span of 2 hours. Mr. Hornby had already condemned the rumors as being unfounded even as he reminded investors that the Bank had just been oversubscribed 2 times in a 750 million pound issue, which had been launched in the previous week.

So, after a fall of around 17% on Wednesday, the shares did manage to recover around 7% of its damaged price even as Mr. Hornby bought 92,812 shares by shelling out 414,000 pounds out of his annual bonus accompanied by another purchase of 100,000 shares, which were picked up by Charles Dunstone for 500,000 pounds, who is one of the independent directors of HBOS.

These purchases, accompanied by around 250 senior staff at HBOS pumped up the total to around 1.3 million shares @ 4.46 pounds per share. A statement by the spokesperson from HBOS said that the move reinforced very clearly about the high level of confidence, senior directors had in the company and that the bank already had a strong culture of its staff having equity ownership and also that a portion of the annual bonus would always be spent by its senior staff by investing in the bank's own shares. The move by the Bank's staff to pick up its shares at lowered prices could already net them a profit of 325,000 pounds after the prices of HBOS picked up at the end of the week.

Mr. Hornby himself now has around 3.4 million pounds worth of shares in HBOS with the last purchase spree resulting in a 25,000 pound profit on paper. Mr. Hornby and other senior staff received their annual cash bonus on Thursday and used up a portion of that bonus on making purchases in their own company's shares as a practical way to ward off rumors and raise their holding in the company. As the Financial Services Authority [FSA] launched an investigation into the origins of Wednesday's rumors, which sought to bring down the bank's shares along with others banks too, HBOS said that it had prepared a detailed report into the movements of its share prices on Wednesday and was planning to hand it over to the FSA. However, it seems to be an uphill task for the FSA to catch the rumor mongers who might have tried to make a killing by first spreading rumors of the bank being in trouble and then cashing in on its declining shares. The FSA has so far managed to prosecute only 2 companies in the past 10 years even as its annual budget has increased to more than 320 million pounds.

The recent downturn of mortgage companies dealing in the US market and even in the UK market has made some market leaders such as HBOS very vulnerable to rumors. The sharp decline in its shares started on Wednesday morning after rumors were spread about the bank's failing financial position and that HBOS was forced to seek emergency funding from the Bank Of England. This caused a massive downfall of the bank's shares and the Bank Of England responded immediately by denying the rumors and pressing the FSA into action in a bid to catch those spreading the rumors with a view to book in profits.

So, even as prompt action by the Bank Of England and HBOS's own staff pitching in a dual bid to inspire confidence in the public about the bank's health at the same time making good use of their bonus money, the ball now lies in the FSA's court as to whether it can prove any wrongdoing by anybody.