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Lloyds TSB seals merger with HBOS Lloyds TSB seals merger with HBOS
(9 minutes later)
Lloyds TSB is to merge with HBOS, creating a banking giant which will hold a third of the UK's savings and mortgage market.Lloyds TSB is to merge with HBOS, creating a banking giant which will hold a third of the UK's savings and mortgage market.
Both firms' boards have agreed to a deal, at a price of 232p per HBOS share, following talks.Both firms' boards have agreed to a deal, at a price of 232p per HBOS share, following talks.
The deal should calm uncertainty about the strength of Halifax-Bank of Scotland after a run on its shares.The deal should calm uncertainty about the strength of Halifax-Bank of Scotland after a run on its shares.
The deal is set to be formally announced on Thursday morning, says BBC business editor Robert Peston.The deal is set to be formally announced on Thursday morning, says BBC business editor Robert Peston.
The talks between the two banks were first reported by the BBC earlier on Wednesday.The talks between the two banks were first reported by the BBC earlier on Wednesday.
With 20% of the UK mortgage market, HBOS is currently the country's largest mortgage lender. Lloyds ranks fourth with an 8% share.With 20% of the UK mortgage market, HBOS is currently the country's largest mortgage lender. Lloyds ranks fourth with an 8% share.
On the London market on Wednesday, HBOS shares fluctuated wildly, climbing as high as 220p and falling as low as 88p.On the London market on Wednesday, HBOS shares fluctuated wildly, climbing as high as 220p and falling as low as 88p.
Shares in the lender eventually closed 19% lower at 147.10p while Lloyds ended unchanged at 279.75p.Shares in the lender eventually closed 19% lower at 147.10p while Lloyds ended unchanged at 279.75p.
How big are these finance firms?
The development comes as the credit crunch has wreaked havoc on some of the world's biggest financial institutions in recent days:The global financial crisis In pictures
  • Barclays Bank is to buy some Lehman Brothers assets after the fourth-largest US investment bank filed for bankruptcy protection, dealing a blow to the fragile global financial system.
  • The US Treasury stepped in with an $85bn (£48bn) rescue package to bail out AIG amid fears the group, once the world's largest insurer, could face collapse.
  • Bank of America bought Merrill Lynch in a $50bn deal - making it the third top US investment bank to fall prey to the sub-prime crisis within six months.
  • In Russia, trading on the country's main stock exchanges was halted after steep falls this week.
  • In the UK, figures released on Wednesday showed unemployment rising once again as the number of job vacancies fell.
The development comes as the credit crunch has wreaked havoc on some of the world's biggest financial institutions in recent days:The global financial crisis In pictures
  • Barclays Bank is to buy some Lehman Brothers assets after the fourth-largest US investment bank filed for bankruptcy protection, dealing a blow to the fragile global financial system.
  • The US Treasury stepped in with an $85bn (£48bn) rescue package to bail out AIG amid fears the group, once the world's largest insurer, could face collapse.
  • Bank of America bought Merrill Lynch in a $50bn deal - making it the third top US investment bank to fall prey to the sub-prime crisis within six months.
  • In Russia, trading on the country's main stock exchanges was halted after steep falls this week.
  • In the UK, figures released on Wednesday showed unemployment rising once again as the number of job vacancies fell.
Our business editor said the government had opted to push through the Lloyds TSB-HBOS tie-up after HBOS voiced concerns that depositors and lenders had begun to withdraw their credit from the bank. LLOYDS vs HBOS Branches - Lloyds 1,900; HBOS 1,100Customers - Lloyds 16 million; HBOS 22 millionEmployees - Lloyds 70,000; HBOS 72,000Savings - Lloyds is the UK's fourth largest savings provider; HBOS is the market leaderRetail savings balance - Lloyds £65bn; HBOS £139bn Union warning on mergerBank of Scotland timelineOur business editor said the government had opted to push through the Lloyds TSB-HBOS tie-up after HBOS voiced concerns that depositors and lenders had begun to withdraw their credit from the bank. LLOYDS vs HBOS Branches - Lloyds 1,900; HBOS 1,100Customers - Lloyds 16 million; HBOS 22 millionEmployees - Lloyds 70,000; HBOS 72,000Savings - Lloyds is the UK's fourth largest savings provider; HBOS is the market leaderRetail savings balance - Lloyds £65bn; HBOS £139bn Union warning on mergerBank of Scotland timeline
"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.""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."
The deal was negotiated at a high level, with Prime Minister Gordon Brown telling Lloyds TSB chairman Sir Victor Blank that it would be helpful if Lloyds could end the uncertainty surrounding HBOS by buying it.The deal was negotiated at a high level, with Prime Minister Gordon Brown telling Lloyds TSB chairman Sir Victor Blank that it would be helpful if Lloyds could end the uncertainty surrounding HBOS by buying it.
"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," our business editor added."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," our business editor added.
He said the deal should reassure HBOS savers but said: "Longer term there is anxiety about the clout this bank will have."He said the deal should reassure HBOS savers but said: "Longer term there is anxiety about the clout this bank will have."
And he added that with continued uncertainty in the financial markets, he thought the worst of the credit crisis was "far from over".And he added that with continued uncertainty in the financial markets, he thought the worst of the credit crisis was "far from over".
Following the takeover, Lloyds chief executive Eric Daniels is expected to take the helm of the enlarged group. The future of HBOS chief Andy Hornby is unclear. Following the takeover, Lloyds chief executive Eric Daniels is expected to take the helm of the enlarged group. The future of HBOS chief Andy Hornby is unclear.
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