The UK's biggest mortgage lender was expected to follow the Royal Bank of Scotland's £12 billion rights issue with its own cash call at today's annual meeting at Glasgow.

HBOS – braced for a general slowdown in the mortgage market this year as the credit crunch bites – could also unveil £3 billion in losses on the mortgage-backed investments hit by the financial turmoil. Smaller investors own about 20 per cent of the business since it demutualised in 1997, but they have seen the value of their shares fall by more than 50 per cent in the past year.

Chief executive Andy Hornby was likely to face tough questions at the meeting from shareholders. But he will argue the capital is necessary to help the business grow, as the bank's market share of new mortgage lending comes under pressure from rival Abbey.

HBOS's share fell from 17 per cent to 15 per cent during 2007 and Abbey is now writing an estimated one in six of all new mortgages.

But some city experts say a rights issue is unnecessary and HBOS should cut its dividend instead.

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