British government defends Lloyds TSB merger with HBOS - 2nd Update
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Thu, 18 Sep 2008 10:34
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London - Britain's Lloyds TSB Bank is taking over ailing mortgage lender HBOS in what is seen as the biggest shake-up in the banking sector in the wake of the current international market turmoil. Chancellor of the Exchequer Alistair Darling said Thursday the merger was "absolutely necessary to ensure stability in the financial system."Lloyds TSB, Britain's fourth-biggest bank, acquired HBOS - or Halifax Bank of Scotland - in an all-share offer worth 12.2 billion pounds (21.3 billion dollars). It will pay 232 pence for each HBOS share, compared with the 147.1 pence they were worth at market close Wednesday. The deal, hammered out Wednesday as HBOS shares were sliding, has been criticized by anaylsts for being negotiated too hastily, and of possibly being in conflict with competition rules. But the government, which backed the merger, stressed Thursday that it would legislate to ensure that the deal would not be impeded by competition rules. "In this case, financial stability must trump competition," said Darling. He told the BBC in an interview there had been "concern about HBOS for a long time," with the situation becoming "more difficult" at the start of this week. "There was not much choice," he said. Analysts said the government's main priority was to prevent "another Northern Rock" - the collapse of a major mortgage lender following the Northern Rock debacle last year. The new bank, likely to be called Lloyds TSB, will cover a third of the entire mortgage market in Britain and have 38 million customers. Analysts have estimated that as many as 40,000 jobs could be lost from the banks' combined staff of 145,000. "Significant cost savings can be made by combining the networks and back offices of Lloyds TSB and HBOS," the agreement said. It added that the takeover would result in "cost synergies" of one billion pounds by 2011, or around 10 per cent of the combined cost base.
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