Confirmed: Lloyds TSB buy HBOS for £12.2bn.

Confirmed: Lloyds TSB buy HBOS for £12.2bn.




The era of the “super banks” is upon us




After all the speculation and rumours yesterday surrounding the possible merger of HBOS – the parent company of Halifax and the Bank of Scotland – and Lloyds TSB – the UK’s third biggest home mortgage lender – this morning the City awoke to the news that the deal had come through.




This will have huge implications for the future of high street banks, as more and more companies merge out of financial desperation and fear of falling stock prices.




Gordon Brown has been a key figure in orchestrating this merger to create a “high street banking giant”. The prime minister was in talks for several days with Victor Blank, the chairman of Lloyds TSB, after becoming concerned about the “relentless selling” HBOS shares experienced this week.




HBOS shares plummeted by more than 45% after coming under pressure for its exposure to the US subprime mortgage market and buyer confidence suffered.




Although its shares picked up subsequently by 10%, there was only so long they could reassure customers and shareholders that it could refinance its £100 million debt in the coming months.




Lloyds’ shares have fluctuated as well, albeit in a narrower range, going from 10% down from Tuesday’s close of 279.75 pence to 10% higher. This is still a low figure in respect to their shares at the start of this year, which valued at 469 pence.



The collaboration of the two banks will form a banking superpower with a market capital of £30 billion. It would have 28% of the UK mortgage market and home loans worth £335 billion, according to data from the Council of Mortgage Lenders.

However, a backlash is forming over the nature of the merger, some critics have called it a “shot gun marriage” due to “market speculation”, whilst others are anxious about the effect it will have on competition, not to mention the possible loss of 40,000 jobs.

By Louise Fernley


Leave a comment