LONDON (AFP) - London shares fell on Monday when the financial services sector was dampened by news of a disappointing rights issue from British home loan provider HBOS.

By late morning, London's FTSE 100 index of top companies had given up 0.36 percent to stand at 5,357.20 points.

HBOS said it had failed to raise almost eight billion dollars from shareholders to bolster finances hit by the global credit crisis, leaving underwriting banks to pick up most of a rights issue.

The country's biggest mortgage lender, seeking to boost its capital after heavy credit squeeze writedowns, said investors had agreed to provide just 8.29 percent of its 4.0-billion-pound cash call.

A bank spokesman blamed the poor take-up on a "fierce financial storm" that has battered the financial sector amid fallout from the collapsed US subprime housing market and the related credit crunch.

HBOS added in a statement that underwriting banks Dresdner and Morgan Stanley would try to sell the remaining shares. The pair will be obliged to purchase the stock on Tuesday if they were unable to find buyers.

However, HBOS shares dived 2.84 percent to 274 pence in late morning deals, sinking once more underneath the issue price of 275 pence.

In the same sector, shares in Barclays slid 1.33 percent to 316 pence, but Royal Bank of Scotland rallied 1.59 percent to 200.74 pence.

Last month, RBS had received a huge take-up rate of 95 percent from shareholders in its own record-breaking 12-billion-pound rights issue.

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