Britains Lloyds Bank seals giant merger - Summary
|
|
Published
:
Thu, 18 Sep 2008 05:30
|
London - Lloyds Bank in Britain has agreed to a merger with the country's biggest mortgage lender, HBOS, creating a banking giant that will dominate the savings and mortgage markets, the BBC reported late Wednesday. The boards of the two banks agreed to the deal after crisis talks in London, at a price of 232 pence per HBOS share, valuating the mortgage lender at 12 billion pounds (21 billion dollars). The deal was due to be formally announced Thursday. It had been explicitly backed by the government and was seen as an attempt to prevent the collapse of HBOS (Halifax Bank of Scotland), analysts said. "The key thing is to maintain stability in the banking system," Treasury Secretary Alistair Darling said about the negotiations Wednesday. Analysts in the City of London, the capital's financial district, said there were concerns over competition issues and the apparent haste with which the deal was struck. "In normal circumstances, this would not have happened," said one. The merger is expected to create a bank with a market value of 30 billion pounds, by far the biggest in Britain. It would have 38 million customers and 142,000 employees. HBOS, which has seen its share price fall by 50 per cent since the credit crunch began a year ago, suffered badly from the fallout of Monday's Lehman Brothers collapse, with predators in the City pouncing on its vulnerability as a major mortgage lender. Analysts said the government had feared that HBOS would become a "Northern Rock mark 2" - after the collapse last year of British mortgage lender Northern Rock, which was nationalized in January. On the London market Wednesday, HBOS shares fluctuated wildly, climbing as high as 220 pence and falling as low as 88 pence. Analysts said the government-backed merger talks were accelerated after HBOS voiced concerns that depositors and lenders had begun to withdraw their credit from the bank. "There were growing concerns in the HBOS boardroom that a climate of fear was being created about its future that could have led to a funding crisis - or a Northern Rock-style run - on steroids," said one. "It was not in the government's interest for there to be the faintest risk that it would have another Northern Rock on its hands."
|
|
|
|
|
|
Print this Story
