INDICATIONS OF SHORTING IN LLOYDS

Stock lending, which is often used as an indicator of short-selling, doubled in just four days last week.

According to research firm Data Explorers, some 3.5 per cent of the total stock is now out on loan, a 10-fold increase since the beginning of September.

Short sellers often borrow shares to sell in the market before buying them back at a lower price. Lloyds shares, which closed 13⁄4p higher at 93p on Friday, have fallen by 14 per cent since the start of September.

Lloyds, a 43 per cent stake of which is owned by the taxpayer, is seeking to raise £25billion in order to leave the Government’s insurance scheme to cover losses on £260billion of risky assets.

The bank is concerned that by taking part in the scheme it could be forced to sell businesses to comply with European state aid rules. Lloyds would raise the money through a package of measures including disposals and a rights issue of £11billion, likely to be pitched at a big discount to the current price.

By strengthening its finances, Lloyds could avoid paying what it sees as onerous fees for taking part in the Government’s asset protection scheme.

Any plan to remove itself from the scheme has to be approved by the Financial Services Authority and the Treasury. A decision could come this week.