September 15, 2008 / 11:08 AM / 11 years ago

HBOS leads bank fall as Lehman stokes funding worry

LONDON (Reuters) - British bank HBOS HBOS.L lost over a third or its value on Monday as the collapse of U.S. investment bank Lehman Brothers LEH.N stoked concern HBOS and rivals face more writedowns and higher funding costs.

HBOS is more reliant than any other major UK bank on borrowing in the wholesale markets for its funding, and could face higher financing costs as a result of Lehman’s collapse, which is likely to increase problems with interbank lending, analysts said.

By 1055 GMT (6:55 a.m EDT) the DJ Stoxx European bank index .SX7P was down 8 percent as banks felt the pain after a frantic attempt to rescue Lehman failed on Sunday.

Analysts at Cazenove said there are likely to be more writedowns for Barclays (BARC.L), Royal Bank of Scotland (RBS.L) and HBOS. “We are particularly cautious on HBOS given its exposures and funding structures,” Cazenove said.

HBOS shares were down 36 percent at 180 pence. Barclays fell 19 percent and RBS lost 14 percent.

Reporting by Steve Slater and Myles Neligan

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