The UK's biggest mortgage lender, Halifax Bank of Scotland, today called on shareholders for £4 billion sterling to strengthen its balance sheet.
HBOS said the rights issue - which follows Royal Bank of Scotland's £12 billion cash call last week - was needed to 'consolidate its competitive position'.
The bank also wrote off £2.8 billion on investments hit by the credit crunch.
More than two million of the bank's smaller shareholders face paying out to maintain their stake in the bank in the rights issue. Under the terms of the deal, they will be offered two new shares at 275 pence for every five held.
The bank's CEO Andy Hornby said the move would help boost the bank's core tier one ratio - a key measure of how well-capitalised a bank is - to between 6% and 7%. Investors will also receive an interim dividend in shares as HBOS looks to conserve its cash.
'We are planning for a more challenging environment ahead and the proceeds of the rights issue should ensure that we benefit from strong ratios even if the macroeconomic environment deteriorates further,' Mr Hornby said.
'In the long term we remain optimistic about the fundamental prospects for our core businesses,' he added.
HBOS also described trading as 'challenging' during the first three months of the year as the credit crisis impacted on the wider economy.
The bank said it is taking a cautious approach to unsecured lending and expects a 'modest' increase in bad debt charges at its retail business.
Mr Hornby, who expects a stronger second-half performance from the bank, said single-digit falls in UK house prices were likely both this year and next.
'The capital raising announced today will provide us with financial resilience in challenging economic circumstances,' Mr Hornby said.
