LONDON (Reuters) - Over two million small investors in HBOS may balk at the prospect of investing hundreds of pounds more in the bank after share prices have tumbled and pressure on household finances intensifies.

HBOS (HBOS.L: Quote, Profile, Research), Britain's biggest mortgage provider, said on Tuesday it wants to raise 4 billion pounds after seeing a big jump in its losses on risky assets and in a move to build up capital in the face of a tough economic outlook.

A shareholder speaking via webcast from the bank's annual meeting in Glasgow said on Tuesday he did not want to throw more money at a bad investment, prompting applause from other investors.

HBOS has the broadest shareholder base in Britain, a legacy of the demutualisation of Halifax in 1997, when 7.5 million customers received shares. HBOS was formed when Halifax merged with Bank of Scotland four years later.

Small investors hold a combined 770 million shares, worth almost 4 billion pounds. Their average holding is 375 shares, so each will be asked for an extra 412 pounds to maintain their stake in the company.

HBOS is offering two new shares at 275 pence each for every five shares owned.

The offer is underwritten so there is no risk for HBOS, but coming just days after an even bigger rights issue by Royal Bank of Scotland (RBS.L: Quote, Profile, Research), hefty recent falls by banking stocks and a squeeze on household spending, small investors may not take up the offer, experts said.

"Shareholders may reconsider their holding in its entirety," said Richard Hunter, head of UK equities at brokerage Hargreaves Lansdown.

"I don't think there will be a massive exodus, but a lot of these private investors are in the same situation as everyone else with the twin threats of energy and food inflation, and it's another expense to look at," he said.