Page last updated at 17:10 GMT, Wednesday, 23 July 2008 18:10 UK

Strong rise in UK banking shares

Customers outside a Halifax branch

Shares in some of the UK's leading banks have risen strongly on the back of takeover rumours and hopes of a recovery in the financial sector.

HBOS, the UK's biggest mortgage lender, jumped 16.9% on talk that it could be a takeover target for Spanish bank BBVA.

Both HBOS and BBVA declined to comment on the rumours.

Among other UK banks, shares in Royal Bank of Scotland were up 11.2%, Barclays added 11.8% and Lloyds TSB shares were trading 8.3% higher.

Raising funds

On Monday, HBOS had revealed that its 4bn fund-raising rights issue had been snubbed by investors.

Initially only 8.3% of the new shares offered were taken up, although a further 30% were taken up on Monday, leaving the rest with the issue's underwriters.

HBOS is not the only UK bank to have sought extra funds to strengthen its balance sheet as the fallout from the credit crunch continues.

The Royal Bank of Scotland has raised 12bn while Barclays has secured 4.5bn in new funding from a range of foreign investors.

Spain's BBVA is currently focused on the Spanish and Latin American markets. It employs 95,000 employees, has 35 million customers and operates in 32 countries.

Last week, Spanish rival Santander agreed to buy UK bank Alliance & Leicester for 1.2bn.

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