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Lloyds TSB seals merger with HBOS Lloyds TSB seals merger with HBOS
(about 1 hour later)
Lloyds TSB is to merge with HBOS, creating a banking giant which will hold close to a third of the UK's savings and mortgage market. Lloyds TSB is to merge with HBOS, creating a banking giant which will hold close to one-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. The firms' boards agreed to a deal, at a price of 232p per HBOS share, following talks on Wednesday.
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 in the morning, says BBC business editor Robert Peston.
The talks between the two banks were first reported by the BBC earlier on Wednesday. Market fluctuations
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. The deal was announced after a day during which HBOS shares had fluctuated wildly on the London market, 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 shares ended unchanged at 279.75p. class="bodl" href="#graph">How big are these finance firms?
class="bodl" href="#graph">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: href="/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm" onClick="window.open('http://news.bbc.co.uk/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm', '1221658602', 'toolbar=0,scrollbars=0,location=0,statusbar=0,menubar=0,resizable=1,width=600,height=530,left=312,top=100'); return false;">The global financial crisis href="/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm" onClick="window.open('http://news.bbc.co.uk/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm', '1221658602', 'toolbar=0,scrollbars=0,location=0,statusbar=0,menubar=0,resizable=1,width=600,height=530,left=312,top=100'); return false;" >In pictures
    class="bulletList">
  • 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 insurance giant 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: href="/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm" onClick="window.open('http://news.bbc.co.uk/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm', '1221658602', 'toolbar=0,scrollbars=0,location=0,statusbar=0,menubar=0,resizable=1,width=600,height=530,left=312,top=100'); return false;">The global financial crisis href="/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm" onClick="window.open('http://news.bbc.co.uk/1/shared/spl/hi/pop_ups/08/in_pictures_global_financial_crisis/html/1.stm', '1221658602', 'toolbar=0,scrollbars=0,location=0,statusbar=0,menubar=0,resizable=1,width=600,height=530,left=312,top=100'); return false;" >In pictures
    class="bulletList">
  • 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 class="" href="/1/hi/scotland/edinburgh_and_east/7621153.stm">Salmond attacks financial 'spivs' class="" href="/1/hi/scotland/7620761.stm">Bank of Scotland timeline
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 class="" href="/1/hi/scotland/edinburgh_and_east/7621153.stm">Union warning on merger class="" href="/1/hi/scotland/7620761.stm">Bank 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," he said.
"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 the very highest 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." 'National interest'
And he added that with continued uncertainty in the financial markets, he thought the worst of the credit crisis was "far from over". He said this transaction, which will create a giant firm with 22 million customers, was truly exceptional in its scale and would not usually be allowed.
Ray Boulger, at John Charcol, said the deal would mean less competition and therefore reduced choice for consumers. "It's the kind of the deal that ministers would normally expect the competition watchdogs to block," he said.
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. name="graph"> "But on this occasion they are using a national interest clause in competition law to override any objections the watchdogs would have," he explained.
The government supported such a deal because any failure of HBOS would have such a damaging impact on the UK.
Richard Lambert, the CBI's director-general said: "This looks like the right outcome. Lloyds TSB is a strong, well capitalised institution, and the new entity will be well placed to withstand the current turbulence.
"The last thing we want is a sharp contraction of bank balance sheets because of the impact it would have on the availability of credit."
While the deal should reassure HBOS savers, there is some anxiety about the power the merged banks will have.
Ray Boulger, of John Charcol, said the deal would mean less competition and therefore reduced choice for consumers.
Following the takeover, Lloyds chief executive Eric Daniels is expected to take the helm of the enlarged group, with the future of HBOS chief Andy Hornby unclear.
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