Lloyds TSB Acquires HBOS For GBP12.2 Billion

Fri, 19 Sep 2008

Lloyds TSB has agreed to buy troubled mortgage lender HBOS for 12.2 billion pounds in a deal that the government hopes will bring back stability to the UK’s financial markets.

The deal comes as Edinburgh-based HBOS - Britain's biggest mortgage lender - lost half its market value in the past week in the aftermath of the Lehman Brothers bankruptcy on Monday and the US Federal Reserve rescue for insurance giant AIG .

A shortage of funds to back its mortgages, caused by the turmoil in financial markets, has left the company in the same predicament that led to the government-backed rescue of Northern Rock last year.

HBOS chairman Dennis Stevenson said in a statement that the deal, which has been backed by Prime Minister Gordon Brown, would make it "one of the strongest players" as British banks struggled with "very high levels of volatility".

Simon Maughan, a London-based analyst at MF Global Securities, said the bank was being bought at "significantly below its tangible book value" and that the deal will prove to be "highly attractive" in the coming weeks.

Lloyds TSB and HBOS will hold a 28 per cent share of the UK’s mortgage market and a consumer banking network with more than 3300 branches between them. HBOS employs around 72,000 people in Britain and around 58,000 people are members of staff at Lloyds TSB .

Lloyds estimated cost savings from the new deal could add £1 billion in pre-tax profit by 2011. The bank also said the merged group would pay its final 2008 dividend in shares to strengthen its capital position and would target a lower dividend payout ratio in the future.

The UK lender also refused to comment on the number of expected job losses and branch closures, although it confirmed reports that as many as 40,000 of the combined 140,000 workforce could be made redundant were wide of the mark.
add to favouritesnewsletterlink to this pagesend to friendpost comments

Link to this page

Copy and Paste the following HTML into your page.


 

Business Newsletter

Please enter your email below and subscribe to our monthly newsletter

Reduce mortgage paymentsSave on Your Mortgage

Would you like to save money on your mortgage? Fill out our quick mortgage enquiry form.

Health InsuranceProtect Your Health

Find Critical illness, Life and Private Medical Insurance PMI policies.