If HBOS shareholders back the company's appeal for a £4bn fundraising at a general meeting on June 26 they will have less than a month to decide whether to take up the offer. T

If HBOS shareholders back the company's appeal for a £4bn fundraising at a general meeting on June 26 they will have less than a month to decide whether to take up the offer. The deadline for the offer, which will see shareholders offered two new shares for every five they own, is July 11 for shareholders who do not possess a share certificate and July 18 for those who do.

HBOS is trying to make it easy for its 2.1 million private investors to take up the offer (after all, they make up 27% of its shareholder base), in particular by offering free dealing services. But does that mean that they should?

The consensus among stockbrokers is that the decision is evenly balanced. Most are holding back before making recommendations, and suggest investors do the same. HBOS's shares hit an all-time low of 249p earlier this month, well below the 275p at which it is offering new shares. Should the shares be below the rights issue price when the offer ends, investors would lose out by taking up the offer. The shares have rebounded from their lows, but lost 22p to 296.75p yesterday, highlighting their volatility.

In theory, shareholders could make a quick profit by taking the new shares and immediately selling them. But prices can move quickly and any apparent gain might have disappeared before the sale is executed.

Sellers could also find investors' appetite for HBOS shares will have been satisfied for some time to come by the substantial issue of new shares.

What about the longer- term prospects for banks, and HBOS in particular? The sector is still under pressure because last summer's credit crunch cut off an important source of funding from the money markets.

Of increasing concern is the impact falling residential and commercial property markets will have on banks, especially HBOS, which is the UK's largest mortgage lender and is a major backer of property companies.

Many analysts think that the current value of bank shares, while low, assumes there will be no further earnings downgrades.

In short, the outlook for both banks is likely to be challenging over the coming months. Bryan Johnston, of stockbroker Bell Lawrie, said: "You have to look at banks as an investment in UK economic fortunes."

That may look a poor prospect at the moment but on a two-year-plus view, some analysts suggest they could prosper if and when the economy turns.

One more issue to consider if you want to invest in a bank is whether HBOS is the best one to choose. Should you keep your cash and invest it in perhaps Barclays, Royal Bank of Scotland or any of their rivals?