Britain's Lloyds Bank seals merger with HBOS
Lloyds Bank in Britain has agreed to a merger with the country's biggest mortgage lender, Halifax Bank of Scotland, creating a banking giant that will dominate the savings and mortgage markets.Updated: Sep 18, 2008, 10:48 IST
Lloyds Bank in Britain has agreed to a merger with the country's biggest mortgage lender, Halifax Bank of Scotland (HBOS), creating a banking giant that will dominate the savings and mortgage markets, the BBC reported.
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).
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 on 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 on 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.