Lloyds to buy HBOS
Lloyds is in advanced merger talks with HBOS to create a giant UK super retail bank, I have learned.
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The deal, if it goes through, would end the uncertainty about the strength of HBOS following the calamitous run on its shares.
And the valuation of HBOS will not be at the current rock bottom price but at a level much closer to the price of last week - so nearer 300p a share.
I'll elaborate later.
UPDATE 09:45AM: The merger of Lloyds TSB and HBOS would end the uncertainties about the future of HBOS, whether it would be strong enough to withstand the downturn in the housing market.
The deal, which could be announced tomorrow, would create a bank valued at around £30bn.
It has the blessing of the City watchdog, the Financial Services Authority, because the enlarged bank would be perceived as better placed to withstand the storms raging through financial markets than either of them on their own.
But the Office of Fair Trading is bound to raise concerns about whether the enlarged bank would have excessive and unfair shares of the mortgage and savings market.
If the deal weren't to happen, there would be a risk that that the extraordinary slump we've seen in HBOS's share price would spook wholesale providers of funds to HBOS - which would be little short of calamitous.
So HBOS depositors should be reassured that Lloyds wants to buy HBOS (because to all intents and purposes it would be a takeover).
The one group weeping would be those who have sold HBOS's shares short - and will now suffer big losses, as HBOS's shares soar.
UPDATE 10:32AM: I am hearing that this deal has been negotiated at a very high pay grade level, with the Prime Minister, Gordon Brown, talking to Sir Victor Blank, chairman of Lloyds TSB, about how helpful it would be if Sir Victor could bring himself to end the uncertainty hanging over 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.
So are there any sticking points. Well, maybe I've slightly over-egged the price that Lloyds TSB will pay for HBOS. Perhaps it will be nearer £2 than £3.
In the end, Lloyds TSB is in the driving seat. It would be, in a way, be a rescue takeover.
And it has a very powerful negotiating position, in that no other British bank - and few overseas ones - have the capital available right now to absorb HBOS.
UPDATE 12:01PM: The big potential obstacle to this deal is the market share the combined group would have in mortgages and savings.
But I understand Lloyds and HBOS have a clever ruse to allay the concerns of the competition authorities - which could in theory block the deal.
It's crucial that there is a way through this competition problem, because confidence in HBOS would be severely dented if there were an extended period of uncertainty about whether the takeover can be executed.
However, for the avoidance of doubt, neither side has asked for taxpayers' money - either from the Bank of England or the Treasury - to facilitate this deal.
All that's required is that Mervyn King, the governor of the Bank of England, is true to his recent word and puts in place new arrangements that would continue to allow all banks to exchange mortgage assets for the equivalent of cash.
Finally I understand there is a bit of controversy out there about what I've said about the price Lloyds would pay.
So for the avoidance of doubt, Lloyds would offer shares as the currency for the takeover (not cash) and as of last night the value per HBOS share of those new Lloyds shares was close to £3.
UPDATE 12:34PM: I now know more about how the competition obstacles to this deal will be surmounted. The government will announce that in the interests of financial stability it will legislate to over-ride the powers of the Office of Fair Trading and the Competition Commission to block the deal.
And it won't be long before the formal terms of the takeover are announced. Both boards met this morning and are meeting again tonight to give their approval.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~52~RS~)
Comments
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Great.. This means it would be sensible to create a new Scottish bank.
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what would that mean for customers?
would the Competition Commission have anything to say about such a large bank?
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So, if all the UK Banks are not to become just one Bank what use was it to deposit 35000 pounds in lots of different banks to spread the default risk!
The UK Government guarantee is 35000 pounds per institution, rather than per account. We badly need new legislation in this area or there will be nothing else that is safe(ish) other than government bonds.
This takeover will presumably imply that customer choice and competition on the high street will be further eroded, but I suppose that is better than the collapse of HBOS and loss of ones money.
How many jobs will go?
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robert,
it looks like the speculators have got what they wanted and small private investors stand to loose......... who knows how much.
but of cause not as much if HBOS had collapsed so thats alright then!
will this consolidation create the competition in the market place that the governor believes will bring down rates for ordinary people and families? NO
will it create bigger profits and protect large pay packets and bonuses for the bankers that have failed to protect us all from the current mess? YES
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No ! NO ! NOOO !
The last thing Lloyds needs is to be straddled with a lame dead duck like HBOS !!!
This is just going to make things worse by not teaching people a lesson when they indulge in unsustainable business models and practice.
Regulators and Competition Commission - JUST SAY NO !!!
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How will Bank B overpaying for Bank A save the world? Or will this turn into another Northern Wreck?
Queues outside Halifax branches this morning?
Could Brown preside over TWO runs on a bank and survive?
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sorry how much of the deposit market? 50%?
and how much of the mortgage market did you say? 25%?
shurely shum mishtake...
may as well just have one bank then and shut down the competition commission.
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"Lloyds is in advanced merger talks with HBOS to create a giant UK super retail bank"
Oh, say it's not so. Is this Lloyds as in Lloyds TSB? I moved my business account from Lloyds TSB to Bank of Scotland about two years ago because of the rubbish service at Lloyds.
Time to move again.
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If Lloyds TSB really merge with HBOS it will lead to the biggest shake out in High Street banking ever.
Combined savings in property, staff and head office functions would lead to enormous redundancies throughout the country.
If Lloyds wants to get into the house mortgage business in a big way then this could be the way to go, although hitherto it has been strong on customer loans which have been far more controllable.
I don't see the sense in this at all, although it may appeal to the ego's of the chief executives.
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Since Lloyds TSB HBOS is far too much of a mouthful, any suggestions for the new institution's name?
How about Bank of Last Resort?
I hope that whoever has been driving the HBOS price down today didn't get out in time.
A better solution in my opinion would have been for HMG to step in and take a lump of HBOS at say 1.50 a share. That would have served two purposes- to guarantee the bank and to deter speculators from targeting the main UK banks.
What next, the Royal Bank of Barclays?
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I'm an expert on shares, but if Lloyds are buying HBOS shouldn't the latter's shares go up?
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If the eventual price per share is to be close to £3.00, then why are HBOS shares trading at close to just £1.00?
Is the market putting a proverbial gun to HBOS's head and saying 'sign or else!'
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Was HBOS was being shorted heavily by the underwriters who were keen to recoup their losses?
I think that HBOS have no one but themselves to blame for these problems. They heavily over lent to homeowners and created the bubble in the first place. The MD is a joke. A short trousered shopkeeper!
Where's the gravitas and intellectual weight?
I have a savings account with Lloyds TSB. I was already unhappy with Lloyds's overseas call centres so if the deal goes ahead I am off.
Lloyds can only be polluted by this deal.
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It's a shame Lloyds weren't allowed to buy Northern Rock and especially with this expediency! Why did the government think that was such a good idea and NR such a bad one?!
I can only assume HBOS have much higher liabilities, so the government must have agreed to sweeten the deal for Lloyds.
Would I be wrong in imagining all of the money flowing out of HBOS et al will be flowing to the only bank with a gilt edged (or should that be guilt edged) government guarantee - The Northern Rock must be struggling to keep pace with the deposits!
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I smell kippers!
Can the unusual activity in HBOS shares and this news be unrelated?
Afterall much comment has been made in the last days that despite the general trend the activity in HBOS shares was highly unusual.
If the talks are advanced perhaps the first unusual activities might just happen to coincide with the commencement of these discussions.
We all know the city leaks like a sieve, after all unless the HBOS press office phoned the news where else but a leak does it come from?
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A note to Gordon Brown. It's called the free market, and it needs feeding. You can either let it run now or tie it up with red tape and taxpayers money, but don't complain when it gets hungry and bites your arm off (and takes your house).
Oh, and what was that you said about eliminating boom and bust?
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Where is the risk management in this industry? Every year billions of pounds worth of bonuses have been paid on the basis of volume but with no reference to risk. Its almost as if the Risk Managers have been walking around with their fingers crossed for 20 years.
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So now they turn on themselves!!
The free market buccaneers who can make money out of anything now have to try and destroy what they have created just to carry on making a profit.
What will be the size of the individual bonuses to be made out of bringing HBOS to its knees and into Lloyds TSB?
Financial services will eat itself!!!
Unfortunately taxpayers are funding the banquet again and again!
And when it's all over, and the masters of the universe are hungry again? Well, a new round of bonuses will no doubt be made from re-privatising AIG, Northern Rock etc....and re-structuring HBoSLloyds.
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Lloyds are buying HBOS for £3 a share. Shares are well below this now? Shouldn't we all be buying shares HBOS?
Does anyone think that the artificial driving down of the HBOS shares has benefitted Lloyds to the point it almost looks like they could have... Sorry, conspiracy theory mode kicked in then!
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This is excellent news. The alternative would be that if HBOS were to fail then the already illiquid money markets would freeze, banking sector confidence would crash and all our mortgage rates would increase.
The competition commission should see the bigger picture.
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16 eddixon
It's feeding on itself!! And then it will feed on us!!
Funny how the free markets can do their worst in Chile, Boilivia, Russia, South Korea, Thailand, Japan etc etc with barely an eyebrow raised. But when they turn on US snd UK.....hhhhheeeellllpppp!!!!!!! Someone bail us out!!!
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Did anyone see John Stewart on the Daily Show yesterday? He explained the banking shakedown as follows (roughly):
"You know that money you put in the bank that you want to use later to buy, you know, food and stuff? Well, they haven't got it any more."
Anyway, a simple question for somebody who understands economics: when the Federal Reserve of the Bank of England bail out a bank, do they use real money, or do they just print some more?
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Dear Robert Peston
I am an avid reader of your excellent, well-researched blog but I was a little put out by your bragging on air at 9.30am when you declared "an exclusive" re the tie-up between HBOS and Lloyds/TSB. Given the dramatic share devaluation in HBOS since Monday, and given the conservative/prudent lending criteria applied by Lloyds/TSB over the past ten years, it seemed axiomatic that this merger would be enacted to the mutual benefit of these key players.
Robert- a little more humility, please. Many of us anticipated this move.............
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From past experience very few mergers work out simply because they cause conflict between the "old guard versus the new guard". We should never forget that companies are made up of people and people have their own individual foibles such as jealousy and mistrust. I well remember the merger between ICI Fibres and the then British Nylon Spinners (BNS) which was such a disaster that the company HQ in Harrogate no longer exists and is now Hornbeam Business Park. So much for mergers! HBOS looks to be going in the same direction?
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Great! just what we need a really big super bank such as they have in the USA.
If that goes bust then we certainly will be in the smelly stuff.
These people are just playing with us.
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Shame.
Robert used to be at the cutting edge of financial journalism 18 months ago - now he's just being used by the 'powers that be' to leak market-pumping stories at just the right moment.
Ever been had, Robert?
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This all stinks to of insider trading and market manipulation ...
Stock opens at 1.85 goes up a bit then suddenly dives to 88p (Heavy shorting that perhaps causes lots of auto stop-losses kicking in) ... then suddenly the news of a LTSB-HBOS merger at £3 30 mins later and price shoots back up ...
Somebody has made a killing here very obviously using inside information. If this is just "the free market" then I'll eat my hat.
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Probably best for everyone to take their money out anyway - or at least get below the guarantee limit.
Seems a little implausible to me, especially buying it for £3 a share when a lot fo the shareholders just sold some for 83p. I would start at 84p as they seem happy selling around there.
As we saw with Bank of America buying Lehman, these rumour and talks often lead to nothing and then the bank collapses and you cannot get your money out.
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The Competition Commission should step in to torpedo this deal to create a UK superbank.
HBOS is, as many people claim, too big to fail, and another buyer could be found at a more sensible and correct price than the £3 Lloyds deal.
I'm sure the Chinese Central Bank would be interested in a purchase at £1.20 a share, keeping the bank afloat whilst simultaneously ensuring greater competition in the market.
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And the combined entity would also be even more "too big to fail".
So perhaps the answer is to break up these big banks (say 5% market share) so that in future they are all small enough to be allowed to fail when they're down right stupid and reckless.
It's time to break the banks up!
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Something very strange is going on with HBOS's price...in the space of a few minutes this morning....it went from trading at over 200p....then went down to around 100p only to the shoot back up to over 200p a few minutes later....what the hell is going on?....these are unbelievably violent price swings. Even accounting for the latest news re Lloyds TSB
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I have been quite a critic of you robert, with your doom-laden reports all the time and hardly ever reporting any good news (such as mortgage rates plumetting over the last 3 months).
But I have to hand it to you - you are certainly in the know! Well done (But I dont take it all back! LOL!)
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A few points
Mergers equal less competition and even worse customer service.
Low share prices will result in more British companies passing into foreign ownership.
Somebody is going to get very rich out of this.
The man on the street will end up with poor choice, poor customer service, rising costs.
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ferringbill 'Do me a favah, guvnor..!'
Yes, of course, it is easy to see how 'obvious' this tie-up is with 20/20 hindsight...
No doubt you made the call the other way when they did not take over Northern Rock ?
I think Mr Peston is quite justified in claiming this 'scoop' - it is a journos 'stock-in-trade' after all...
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So, just to be clear Robert, it was you that broke this story and not Karl West in the Daily Mail? Bit cheeky claiming it for yourself - again.
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When will Lloyds TSB say we changed our mind and offer £1.50 only? Of course yesterday's suspicious activity was nothing to do with them guv.
We could really do with a dozen fat cats being strung up on lamp posts on Wall Street and the Mile as a warning to the rest.
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re Post 19
I signed on to spreadbetting account to bet for a retracement in price but there was a 50p or more difference in buy/sell prices for the best part of an hour, also no online trades accepted while price was heading back up.
Trading firms want to keep all profit for themselves.....
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Oh, those evil hedgies! How dare they believe a company to be overvalued! Honestly, you might think the Stock Exchange was a free market or something. (And I speak as an HBOS shareholder)
I suspect another group weeping might be Lloyds TSB shareholders if they believe that Lloyds is being forced into a shotgun marriage with a basket case at a price way above the odds. Sin in haste, repent at leisure?
And if HBOS is in trouble, then what price Bradford and Bingley? Who's left to take them over? RBS/Natwest still suffering from their ABN-AMRO acquisition, Barc picking through the wreckage of Lehman, Lloyds too busy with propping up HBOS, Santander with All/Leic, I guess that leaves HSBC as the last man standing.
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What will happen to Howard?
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So, this means all the smaller Banks will inevitably be swallowed up by their larger cousins.
In the old days this would draw in all the takeover arbitrage investors.
Nowadays it just seems to bring in shortselling hedgefunds.
When will massive stock lending be curtailed ?
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there's two points i'd like to make.
Que: Where are we in the credit crunch then?
Ans: The credit crucn is like a meal. We've had the starters and now were chomping into the main meal as it were...
Que: how stable is the CDS system
Ans: if yoy had a disease like foot and mouth, an epidemic, you would ring fence the animals and adopt a strategy to limit the fallout as was done recently.
The CDS is a wonderful system for the transference of a contagion throughout the world. IF it were cattle, it would be like us making sure infected cattle were literally tranported to uninfected herds.
in short its a wonderful system designed to fail when it is critically needed.
not surprising when you tink that the financial system has become like an inverted pyramid with all too few indians at the botton and too many cowboys at the top to mix my metaphors. Cheers.
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I guess the idea here is to produce a bank which is 'too big to fail' - ie more taxpayers money on the line.
Since every High St has both a Lloyds and an HBOS, presumably this will entail massive job losses at HBOS.
Like the 'rescue' of AIG, I fear all these steps will not prevent the inevitable, just delay it a few more weeks.
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DEVALUATION OF CURRENCY IS THE NEXT STAGE OF THE CREDIT CRUNCH.
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So why aren't the Shortsellers targetting Barclays for taking on toxic staff ?
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Good.
I hope the people and hedge funds who shorted HBOS get stung badly.
Aggresive shorting is one of the main drivers of financial turmoil at the moment. I am not a fan of shorting companies at the best of times but right now it really aint cricket and just adds to the global credit crunch woes that everyone is suffering.
I'm pretty confident HBOS could have weathered out this storm without any real problems if it wasn't for them clearly being picked on as an easy target.
If you trade on shorts I hope you are crying into your lunch this afternoon rather than dancing gleefully like I'm sure you were at breakfast.
For the record I have nointerest in HBOS at all dont even have an account with them.
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what happens to your mortgage if your mortgage provider goes bust?
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Thank goodness for Robert Peston !
He makes things that we need to know about so much easier to understand.
Thanks, Robert.
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A commenter on the FT says that only 4% of HBOS was out on loan (ie. short) yesterday. Perhaps you can tell us whether this is true or not? Also, why hasn't there been any kind of statement yet?
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Very opportunistic of LTSB. But what would they call this new corporation? A fortune to be earned by the branding consultants?
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Well, here's hoping the architects of this crisis get taken to the cleaners. I mean of course the big shorters.
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£3 then £2. in very volatile markets with shareholders and depositors money at stake you need to temper your enthusiasm for speculation and behave more responsiblity. think before you write at the moment
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"Perhaps it will be nearer £2 than £3."
Yes !!
Well done again on this SCOOP Mr Peston !!
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So this is all being negotiated at a `high pay level'.
Since when has there been a direct relationship between pay and ability?
Some extremely well paid people have brought our economy to its knees, whilst some poor people are very good at making ends meet. It is all about what is needed rather than what is wanted.
Perhaps it is time we turned the world upside down and let the meek inherit.
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Interestingly, Halifax's own sharedealing service was unavailable Tuesday afternoon and unresponsive to dealing requests this morning too. So small investors with HBOS were unable to either buy or sell; optimistically take advantage of the low price, or bail and sell. Bet the big traders didn't have this problem!
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Robert, are you not also guilty of irresponsible rumours now? This is price sensitive information to both HBOS and Lloyds so to suddenly change your mind so drastically about the price is scandalous and suggests a lack of diligence in your keenness to get a scoop out. I am now SHORT Peston.
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Have you seen what this is doing to the share price of HBOS. It appears that the short sellers are desparately trying to push the share price down. Not sure how responsible this news release is, it is definately having a huge impact on the share price. If you announce that the effective value of a share will be 300p whilst it is trading around 120p isn't this as iresponsible as some of the short selling practices? As with short selling I don't know what the answer to this practice is.
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Anyone shut out of participating in HBOS share speculation from Barclays stock brokers??
Tried to buy near 150p but they have suspended trading on those shares. Utterly let down by barclays! How are small investors meant to be able to participant in the stock market?
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Not wanting to pour cold water on this deal getting done and bankers, accountants and lawyers taking their egregious shares of lucre, but whenever PM 'Jonah' Brown has been publicised as supporting a sports personality, team or whatever they've failed.
It's the 'Jonah' Brown touch.
ps will he be looking for a 'bung' to shore up Labour Party finances?
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I have been told by all sorts of people and the Government to be prudent and not live beyond my means. So I have saved over the passed 30 years little by little and now have a sizable sum above the limit of 35,000
Why does the Government NOT guarantee all deposits in the institutions. This is my hard earned savings risked by some bankers who want to get rich quick. Means the Government will have to support me in old age as I could lose my savings.
The shareholders know the risks so no help required there!!
Why did all the press and banks say this morning - do not worry about HBoS and then they are secrectly in talks...
Why are banks greedy for profits BUT when losses appear pass it onto us the taxpayer.
Why has HBoS which looks after the UK market exposed to the US?
How do I get the £3,500 that the government has put into Northern Rock on my behalf out of it? Rethorical question as where would I put it?
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The former CEO of Bank of Scotland, Peter Burt, who merged a once great institution with the Halifax Building Society, should hang his head in shame.
Not only has it destroyed shareholder value, but the "merger" with Lloyds TSB will result in huge job losses
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How could a serious business commentator suggest the price would be 300p per share?
HBOS had a rights issue at 275p a few months back, and could not sell the shares at that price!
Lloyds, as you have belatedly recognised, is in the driving seat here. They can walk away and watch HBOS have to be rescued by the Government, or get the bank at rock bottom price.
I think the price will be closer to 175p per share. But running with the 300p per share story certainly helped boost the share price in the short term - well done.
I wonder who dropped you the info?
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I agree with Drew_lg - A sad day for HBOS customers if this leads to more overseas call centres.
I use an HBOS credit card and its UK call centre is the best I deal with. I was thinking of transferring my personal and Business current accounts and my business credit card to them.
A key criteria for doing business for me is a UK call centre. In part because I think it is short sighted to outsource UK jobs, but mainly because you can waste ages dealing with the accents and misunderstandings (not to mention the multi-level menus, both phone and agent) that characterise a lot of overseas call centres.
I have switched insurers (Car, House, Prof. Indemnity) and ISP on the basis of time wasted dealing with overseas call centres. Sure, It costs me a little more, but the service is much better and I more tan make up the cost in saved time.
I was at a business meeting run by Lloyds a year or so ago when the subject of Lloyds use of overseas call centres came up. To say the Lloyds' rep in my group went away shell shocked would be an understatement.
Let's hope for the sake of HBOS service and UK Plc jobs that Lloyds leave the excellent HBOS contact centres intact.
If not, I for one will be moving!
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I see a problem. As Robert says the OFT are bound to investigate this which will take a few weeks at least. They might then refer it to the Competition Commission whose investigation would take more than a year.
Lloyds could buy HBOS but the merger may then have to be unwound if the competition authorities found it to be anti-competitive. I suspect Lloyds will be looking for assurances that this wouldn't happen. And yet the Govt isn't able to provide such reassurances because the competition authorities are independent.
A message for Lloyds: caveat emptor.
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So, we have HBOS which is being saved because of its size and impact on UK economy being taken over by Lloyds TSB. This will create a bank so large that it most definitely couldn't be allowed to fail. Short term gives investors confidence.
Snag is that the combined bank is then in a position (after a respectable time) to go on a mad lending spree, pay excessive wages / bonuses etc just as the huge US companies have done as it will know it can't be allowed to fail.
Better idea would have been compulsory disposal to other UK banks of say half HBOS mortgage book.
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#26 If the choice is between fuelling mis-placed confidence or lack there-of I know which one I would prefer. One results in short term inflation of price and the other results in catastrophic failure of a bank that possibly could have survived.
It would be irresponsible reporting to contribute to a run, which is a phenomena based on a mixture of objective analysis and horribly compelling group dynamics as adrenaline and fear combine, compelling everyone to avoid being the last person holding shares.
I suspect RP has in mind the fall-out from Northern Rock, bankers are not the only ones who can suffer from risk taking.
I think combine them, alleviate doubt, wait for everything to settle then regulate to sort out competition issues in the future, it will be very interesting to see what policies are being formulated for future implementation at the moment, any sources RP. We hear vitriol from across the water but everyones going to be hedging their (poltical) bets before elections there and here I guess.
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How can this happen? Just this morning, you were telling us HBOS had all the capital it needed to ride out the crisis - now the short-selling by the hedge funds means my investment which last week was worth over £3 a share, and was probably fairly valued at that price, will be given to Lloyds shareholders for two-thirds of that.
I've had it with investing directly in shares; the small investor just gets turned over every time. I'm moving some into funds and investing the rest elsewhere.
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Oh God.
Gordon Brown has got involved? Jonah Brown? That's HBoS doomed then. And possibly Lloyds too.
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I am deeply concerned by the panic thats going on at the moment. Short selling is rampant and its determental to the whole economy. The media need to shore up the situation and no longer talk up a mess.
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HBOS were always pretty awful, so in the end the greed and incompetence has come back to bite them. I feel sorry for the normal staff in call centres and branches who had little decision over anything - anything involving a real decision was dealt with by underwriters etc at remote locations. However in the end the sooner the idiots in charge are publicly humilated the better. I just hope they get a good metaphorical lynching for their actions which have succeeded in destroying two previously successful institutions.
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If Brown's involved,whatever results will be doomed!
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I really think it is irresponsible for a journalist in your position to be making specific comments about share prices. If this practice was carried out by city professionals I am sure thay would be facing legal action.
What you have now said could have put a ceiling on the HBOS share price of £2, I believe you have directly affected the market with this inside information.
I don't think you are going to get away with this one Preston.
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@39
"What will happen to Howard?"
Howard is a clever chap and got out a few months ago if my memory serves me right.
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So the predator turns up saying he is a white knight and the monopoly and competition complaints will be brushed aside due to it only being a white knight, a saviour is needed. Clever stuff. At least it many get rid of those ghastly smirking halifax ads.
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"I am hearing that this deal has been negotiated at a very high pay grade level, with the Prime Minister, Gordon Brown, talking to Sir Victor Blank, chairman of Lloyds TSB, about how helpful it would be if Sir Victor could bring himself to end the uncertainty hanging over 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.
So are there any sticking points. Well, maybe I've slightly over-egged the price that Lloyds TSB will pay for HBOS. Perhaps it will be nearer £2 than £3."
Surely the important thing is not that this "rescue" deal has happened, but what it has/will cost to make it happen. Even on a going-concern basis, a prudent valuation of HBOS shares would be zero, so what undisclosed promise has the Great Helmsman of Kirkcaldy made to the shareholders of Lloyds TSB for their executive board to agree to paying good money for such a basket case?
How much of the HBOS contingent liability to the housing market will not actually be assumed by Lloyds TSB, but by the UK taxpayer?
How much will it cost the UK public for Lloyds TSB to have been allowed to make super-profits due to their control of such a large share of the future banking market?
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This will stop City Jokers who gamble on the share price by buying Shares ' on credit ' and then selling shares at a lower price and then pocketing the difference.
They should make ' Selling Short ' illegal - they knew fine the Bank would be supported by ' tax payers money ' if they got into trouble so these people are making
money on our Backs.
HBOS was nearly £ 10 a share last year and since the credit crunch it has been attacked by these City Jokers - its a self perpetuation Process - the lower it goes the more Jokers jump on the band wagon
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Why are 'shorts' being blamed for stocks plummeting??
If that's the case why don't these 'shorts' just buy loads of stock because then the price will 'inevitably' go up according to these doommongers.
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The HBOS model fits very well into the the Lloyds TSB model. Lloyds alraedy has Cheltenham and Gloucester in its stable. One can visualise CandG and Halifax becoming the UK No.1 mortgage lender while the BOS wing with its strong business account element slip comfortably into Lloyds retail banking.
The merged bank will have much too much High Street real estate and far more staff than is needed. Look out for widespread job losses and lots of 'Lease for Sale' boards.
I think Lloyds might well have had ABN Amro in mind. HBOS have been paying in part for overstretch in this acquisition. With the Lloyds takeover, you could argue that ABN has found its real value as opposed to the inflated price HBOS paid. HBOS are partners with Fortis and Santander in the ABN adventure and Santander have been active in the UK retail banking market for some time. I wonder if there is a connection.
Interestingly, Barclays were at one time keen on ABN but did not make a move on this occassion. Their model which includes the Woolwich would have suited HBOS as well. Perhaps they are keeping their powder dry for a cherry picking job on Lehmans?
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"I am hearing that this deal has been negotiated at a very high pay grade level, with the Prime Minister, Gordon Brown, talking to Sir Victor Blank, chairman of Lloyds TSB, about how helpful it would be if Sir Victor could bring himself to end the uncertainty hanging over HBOS by buying it."
This would be the same Gordon Brown who utterly messed up the business of trying to get a private company to buy Northern Rock? Yet another Gordon Brown stuff-up on the way then!
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Not content with bringing down Northern Rock, Robert Peston now seems intent on wiping out HBOS as well. When will this end? Has he got a vested interest in all this carnage?
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Where are the Moderators? As I write there are 30 comments, stretching back 1.5 HOURS, which haven't been cleared yet?
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Who will the hedge funds go after next?
My money is defo on RBS !
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Re: Baalambandpig (comment 39)
I have a friend who is quite senior in what used to be Halifax (he was in one of their ads many years ago) and I asked him about all of this the other day.
He said that HBOS had dropped all the tv ads with Howard in as, at the moment "we can't afford to give you extra".
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If the collapse of HBOS would cause such a catastrophe then surely the competition commission should be told where to shove their concerns?
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What I do know from my experience of working in domestic finance and debt, is that Lloyds were very unorganised, but also fairly reasonable to defaulting customers. Whereas, Halifax were pretty on top of stuff, but never ever made a deal whatsoever.
So, either it’s a commuppance, or maybe, Lloyds still doesn’t know how much bad debt its got because its so unorganised.
They never really merged the TSB with Lloyds – lots of complicated accounts and people paying off debts twice due to mix-ups with account numbers … that sort of mess … Now they’re being paraded by Brown and BoE as the knights in shining armour …
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They could call the new company - Lloyds Equitable Savings Bank Of Scotland.
Any ideas how to shorten it?
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The main focus on the reporting of this story is completely wrong. I see that a few posters on this blog (sherwoodbandit, the_nutty_dragon, wykhamist) have picked up on the real issue that is at stake: if HBOS is too big to fail, what will be the case for a Lloyds-HBOS entity? We are only just at the beginning of a major recession and the collapse of the UK property market, so HBOS will be facing HUGE losses in the coming years. Lloyds would struggle to ride it out on its own, but I very much doubt the combined entity will be able to shoulder those losses, and we will simply end up with our own Fannie Mae/Freddie Mac situation. The eventual result: a massive bail-out from the UK taxpayer.
The saying "don't put all your eggs in one basket" has been around for a very long time.
And for very good reason.
Creating ever larger financial institutions does not lower risk - it INCREASES it. Such a merger between Lloyds and HBOS might be some sort of botch-job, quick-fix short-term solution to the immediate problem but - irrespective of the competition issues - it is a recipe for disaster in the longer term: very Gordon Brown indeed. No wonder his sticky paws are all over this deal.
IMHO Lloyds shareholders would do well to vote against such a deal, rather than saddle themselves with HBOS' problems.
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Well, this'll teach me to be lazy. I faffed about not sending my details to a share-broker as I planned to buy several thousand HBOS shares while they were depressed.
Reading this, I could've made a killing and bought a house.
*sigh* guess I'll have to get my backside in gear and sniff out the next bank the shorters plan to screw over.
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I'm not really sure I trust any deal supposedly masterminded by El Gordo.
This is either another dubious idea from a man who can point to NO good economic decisions of his own, or else a clumsy and stupid attempt to glean some positive PR for the govermnent.
Looked at more closely, it suggests that the government has been panicked into making the wrong move. HBoS is a victim of stock speculation, and its shares need to be suspended until short-selling is restricted, as it was in the U.S. between 1929 and... oh, around the time this ridiculous mess started last year.
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"The deal, if it goes through, would end the uncertainty about the strength of HBOS following the calamitous run on its shares.
And the valuation of HBOS will not be at the current rock bottom price but at a level much closer to the price of last week - so nearer 300p a share".
"Well, maybe I've slightly over-egged the price that Lloyds TSB will pay for HBOS. Perhaps it will be nearer £2 than £3".
"for the avoidance of doubt, Lloyds would offer shares as the currency for the takeover (not cash) and as of last night the value per HBOS share of those new Lloyds shares was close to £3".
How does the last comment amount to "avoidance of doubt"? when he previously said "nearer £3", then "perhaps nearer £2".
Have Lloyds said they are tied to last night's share price equivalence?
And as others are posting, if £3 is accurate, why are the shares trading at about £1.80 at present?
I wonder if Robert really has any idea what the offer price would be... and if he does, is he respecting market sensitive information?
Anyway, thanks for your contribution to "ending the uncertainty" !
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#63 APbbforum
Looks like RPs update from 12.34 clears that up then.
Things are only uncompetitive if they're not politically damaging! Otherwise, its anything goes...
To pass emergency legislation to bypass the independant competition authorities stinks of desperation! How desperate is this government to avoid another Northern Rock!?!
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http://ftalphaville.ft.com/blog/2008/09/17/16008/bailing-out-a-bankrupt-lehman-saving-markets/
How can $87bn happen under the radar ?
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Why don't you tell the people what is really going on Robert?
Way too many common purpose types in the beeb nowadays, which is exactly why no one will be told the truth.
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This is a deal that is doomed to failure, Lloyds needed to expand income flow form overseas not more of the same.
Paper swaps are great but when GB gets involved we can be sure it will go pear shaped like his handling of the economy.
Think again Lloyds before you sign anything.
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If it's true that the government is going to legislate to over-ride the Competition Commission, I find that extremely scary. The Competition Commission is there for a good reason. Customer service standards are already scraping the bottom of the barrel throughout the retail banking industry, and without vigorous competition, they are going to fall further.
If this merger goes ahead it will not be a good day for retail banking customers.
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Robert Peston, this is blatant and disgraceful market manipulation. Why are you allowing yourself to be used in this way?
Where're the regulators? Where are the official statements on this matter?
This is creating a false market.
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I said in #63 earlier that competition authorities would be a problem. No longer it seems. The Govt is passing emergency legislation to over-ride them. Gordon Brown was behind legislation to make the competition authorities independent and remove ministers from merger decisions. But now in one fell swoop this has been ditched.
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Peston - you've been played like a kipper, you really need to be a bit more careful when it comes to mentioning numbers like £3. Just ask some of your colleagues who actually report the City for some of the rules and obligations you're under. Someone clearly had to dump a couple of million HBOS in a hurry this morning - I wonder if they were your source? I hope the FSA investigates.
Never mind the deal that has obviously happened here - "You can ride roughshod over competition law, as long as you don't sack anybody who lives in Glenrothes or Dunfermline East". If I was Lloyds, I'd just wait for him to go, and then "cut costs out of the business" in Edinburgh.
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Regarding post 66
Obviously your HBOS shares were not fairly priced at £3 a share, as the market has now shown.
It is a fundamental principle of markets that prices can go down as well as up. Your disbelief (or anyone's for that matter) at the fact they have dropped is astounding.
The fact that bookies and casinos do so well should show that usually the only winners from gambling are those who control the game, and in effect that is all you are doing is having a punt on prices.
red or black, heads or tails?
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big is better so as to ride out the financial storm....
then the next article on bbc news is that the US Fed has given in and bailed out AIG as this is too big to fail !!!
Whilst the crisis now and needs some action are we just postponing a potential future problem.
What assurances / controls will be put in place to stop this new UK superbank from going down the reckless route so many have done this time round ?
Who do we trust now with our money ? and do we really have any choice as no bank account means higher prices and less access to services ! ?
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Demonstrates clearly how the regulation of the financial systems in the UK have been non existant.
Now with the express intent of the Prime Minister (no less) the last bastion of financial regulation is to be thrown to the wind, the competition watch dog.
So not only have the British public been asked to socialise the risks these banks have taken on, we now allow them cart blanche permission to corner a market and to actively reduce competition.
So what exactly do the people get from capitalist competitive markets these days?
Oh yes, we get the privilege of watching tax pounds being spent on easing the banks financial risks and allowing them to contract the market, reducing competition designed to keep the bastards honest.
Well done Mr Brown, as an ex chancellor with such a reputation for prudence, it is a shame you didn't expect the banks and investment houses to demonstrate prudence too. Seems they are driving us all to the wall with the risks they have taken.
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didn't this government veto Lloyds attempt to takeover Abbey due to unfair competition? well this is a bigger deal so i expect the government will turn this down too.
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my last comment was taken over by RP's update. ..........
so this government will stop at nothing if it is politically expedient. what next, HSBC takes over the whole of the UK banking and mortgage industries?
and another thought, what about the EU and their competition policy, could they yet put a spanner in the works?
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One further comment given the developments since my first post:
(1) Legislation made in haste is invariably bad legislation. The Competition Rules have been in place for many years and are there for very good reason. Passing emergency legislation to circumvent them is yet further evidence of Gordon Brown's short-sighted, quick-fix solution approach to major problems. It will simply come back to bite him (in the unlikely event that he's still there) in the future. If HBOS is unable to secure funding, then it should be allowed to fail or suffer the same fate as Northern Rock. End of.
(2) If the offer is to be made in shares rather than cash as suggested by RP, then this is usually indicative of the fact that the acquirer belivese its shares to be over-valued (this was particularly evident in the dotcom boom). Read into that what you will.
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Great news! it looks like HBOS may be saved from the evil bunch of west end parasites that have been one of the main causes of what has occurred over the last twelve months or so. Hopefully they will lose their shirts in the process. What is laughable however is that our clueless enforcers at that well known sleepy gentlemen's club of the FSA have yet to find a way of dealing with this bunch of market manipulators. You would have thought that following their grilling at hands of the Select Committee, following their stirling efforts wrt to NR, they would have more of a clue of what needs to be done to put these crooks behind bars. Why are we even bothering to pay these guys?
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"The government will announce that in the interests of financial stability it will legislate to over-ride the powers of the Office of Fair Trading and the Competition Commission to block the deal."
Excuse me?
Translation: Government sets up independent body to ensure customers' interests are protected and that free markets are maintained (or rather, something vaguely resembling free markets are maintained). Government then over-rules this "independent" body because it knows best.
Of course you do Gordon, of course you do...
Just like you did when you were ending boom and bust by fuelling record economic growth on the back of a housing bubble for 10 years. Here's some news for you brainy economists out there: You (unless you're Lehman Brothers) have to pay back what you borrow - with interest.
I have to say I don't think I get the full picture here. If the problem is seriously the measly sum of £100 million, I'm not opposed to just sticking it on the PSNCR (I O U. Hugs and Kisses - A. Darling) like everything else - for once it would be a prudent move long term, safe guarding both jobs and competition.
These two weeks have been surreal in terms of finance economics. Is now really the best time to decide the future of UK banking with (another) knee jerk panic.
Not that the "long term" matters for Labour. They'll be long gone when we're all paying base rate plus 10% on our mortgages.
I'm not defending HBOS's lending strategy, but at least they've given us (relatively) decent savings rates for a good few years. Looking on the bright side though, if I'm lucky I might get a well designed debit card at the end of this - quite possibly the only reason to currently be jealous of Lloyds current account customers.
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"The government will announce that in the interests of financial stability it will legislate to over-ride the powers of.." has to be one of the scariest things I have read on BBC News.
Sod democracy, sod process, sod consumers, sod Parliament, so the regulators, sod the lot of you, "in the interests of financial stability" we can pop to the Privy Council and do what we like.
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The governments of US and UK have been pulling the wool over our eyes too long.
The duty of government may be to protect the people from physical threat (real or imagined) but what this has shown is that it should also be their duty to protect us from the markets, specifically from the individuals who control and manipulate them.
Clearly no-one in government is big enough to take big business on....let the people do it. Withdraw savings (they're probably safer under the bed at the moment) and demand that no tax money is used to bail out badly run businessesn and demand that the profiteers pay back every penny that they have claimed in bonuses and commissions.
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Is it really appropriate that a BBC employee releases such price sensitive information as this - including speculation of the "offer price"?
Does this not also undermine HBOS negotiating position in that a failure of talks would cause much more panic in the markets noe that the potential merger talks have been made public?
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So then, would this be a good time for someone to buy a small amount of shares in HBOS, a few hundred pounds worth ?
With the price around 200(ish), would it be wise now to invest, then hopefully make a small profit in say 1 to 2 years time ?
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Erm, I think some of the people talking about 'market sensitive information' need to look at the bigger picture here.
The more information in the public domain, the better we are all equiped to buy or sell shares.
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So the truth is out on the real state of the financial markets, the government can no longer claim that we are 'well placed to ride out the storm' or that we are not affected.
They have effectively brokered a deal between Lloyds TSB and HBOS, legislated to block the competition commission from appealing against this. Nobody does this unless the situation is dire!
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I wonder when the advanced talks started. 8:30 this morning?
Due diligence?
Changes in basic competition legislation?
All in a morning?
Didn't these things used to take, well a few weeks anyway?
Why can't we always have such wonderful examples of dynamic government interference? Just think of the opportunities.
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There is something synthetic about this situation. Something doesn't smell right. This is, in my view, about saving Lloyds TSB while making it look as if it is about saving HBOS (which didn't need saving).
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Hopefully it goes through, otherwise the panic is so much people will withdraw their deposits and speculators will start selling HBOS shares.
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On C4 's text page 514 (Popular shares pages 1-4) the quoted company 'HBOS' and it's relevant price, temporarily disappeared off the screen this morning !!
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Sneaky: I noticed that "UPDATE 12:34PM" was itself updated around 13:50 when the text changed from saying that the boards were in a meeting and would announce the terms soon to "Both boards met this morning and are meeting again tonight to give their approval."
I am impressed that Peston scooped this story but he is undermines himself when he rewrites sections with an earlier time-stamp than was the reality.
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Great news! it looks like HBOS may be saved from the evil bunch of west end parasites that have been one of the main causes of what has occurred over the last twelve months or so
If I was one of those West End parasites I'd go down to the nearest acting college and pay a bunch of students to queue outside an HBOS Branch. Then I'd tip off the BBC to go and film a queue of people trying to withdraw their money. That would frighten off the Lloyds suitors and drive the share price through the floor.
That's what I'd do. If I didn't care about the economic well-being of the country.
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At what point will the investigative journalists reveal the names of individuals and/or companies making significant speculative hedge trades on HBOS?
Given that large anounts of capital must be flowing to create such large share movements isn't it time somebody was named and shamed.
Surely this is factual information is open to those in the know. One feels at the end of the day that Robert was massaging the news yesterday through 'responsible' journalism. A huge disappointment, given the respect I have for his reporting to date. For example apparently trading was suspended seven times on HBOS shares and I saw no reference to this at all during the day.
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i bought some an hour or 2 ago for 181. hoping, either way the talks go, hbos is a sound company. wish i'd bought at 88!! in the 2ours since, its hit 197 and gone down 2 150! so fickle!
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SO - does this give the short sellers a bloody nose?
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Peston...when you say 'I have learnt', don't you mean to finish this off with 'by reading all the available wires which have reported it' instead of trying to claim you are ITK when in reality, without a script you are a babbling buffoon (er, you know, I mean etc) and even with a script your voice still grates like fingernails on blackboard.
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I think in the interests of the country, while we are at it, Tesco should takeover Aldi and Lidl, because we can't have overseas companies grabbing market share,er, Sainsbury's because it would be in better hands than the 'Dubai Consortinum',er Morrisons because it's a pain for consumers to drive to two different shops for the cheapest food, and Asda because it's a pain to do all these tax forms when one big one would suit.
''Going,going, gong.Takeovers and mergers no problem. See Gordon.''.
Do you think he will have a cheek and put in for his advisory fee..........
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Who would have thought that the EU would be useful.
C'mon brussels step in and end this merger madness!!
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Pray that when Wall street opens in 5 minutes that the AIG deal has managed to stabilize the Dow.
I can see everything going "belly up"
Domino effect is well on its way.
Civil unrest and food fights in the supermarkets.
What have they done ?
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Although this deal is good in solving a short-term problem, it does seem to hasten the day when even more market concentration is in even fewer hands, which is surely what got us into this mess [with AIG etc.] in the first place..
But desperate times...
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So it is now OK with this Govt for Lloyds to takeover HBOS. Why was is not OK for Lloyds to takeover Northern Rock last year?
Perhaps because a lot of Labour MP's have seats in the north east, and did not want all the fall out from the loss of jobs in NR and linked businesses. Well that is still going to happen now that NR is nationalised and Sandler puts through his plans to cut jobs.
This Govt should have just stayed out of NR, and let market forces sort out what to do with it's assets/liabs. The taxpayer would not now be carrying the risk for years to come.
At last they have learnt that lesson, and will allow Lloyds to have HBOS.
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'HBOS is one of those rare banks that's absolutely central to the financial system.
The economic jolt that would be engendered to the UK economy if HBOS went down, wreaking havoc for millions of savers and for the housing market, would be catastrophic.
So the government would be obliged to bail it out, long before that happened.
HBOS is, in the jargon of regulators, far too big to fail.'
How can RP be allowed so make this statement ?
Sure, catastrophic repercussions will follow if HBOS is allowed to fail.
But even worse catastrophic repercussions will follow if Government loans are given to HBOS (and/or Lloyds) to keep the company temporarily solvent until the house price crash wipes out any company value, at which point a much worse and depression forming catastrophe will occur.
So HBOS is not too big to fail, just fork of a small and a large catastrophe !
How can RP be allowed to misguide the public ?
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The only solution to this problem like it or not is a reversal of house price falls, both in the UK and the US, if house price declines continue as they are, then all the banks will fail, the only capital they will be able to raise is from savings, which are rapidly being eroded by inflation and higher mortgage payments. Savings capital is not sufficient to sustain the current financial system. It's a chicken and egg situation but there are clearly actions that the government and BOE can take to prevent this worst case scenario, waiting for bailouts is not a recommended one.
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Mass walk-outs at the Office of Fair Trading?
OFT are currently fighting the banks (including through the courts) every day on unfair personal accounts.
I assume that the massive slap in the face they are being given by the introduction of legislation to emasculate them will cause some sort of resignation response?
Or does OFT's "holier than thou" attitude - and risk of personal financial disadvantage - stop at their own bank account?
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er Morrisons because it's a pain for consumers to drive to two different shops for the cheapest food,
Morrisons? Somerfield food at Waitrose prices? No thanks.
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Robert, if HBOS is/was fundamentally sound then why would they effectively want to be taken over?
The way share prices plunged this morning, and then you made the merger announcement - people are saying the government asked you to leak the information in a hurry to prevent complete meltdown and a run on hbos. Is there any truth to that?
And isn't there a danger that the new merged companies, rather than standing taller together, may fall all the harder together. Are you convinced they and the government know what they are doing here and it is for the best?
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With regards 117
Emptying the contents of your local old folks home and doing it will be more realistic.
Something to do on Saturday morning.
HMMMM
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This tri-partite system for macro economic policy and financial regulation is a complete horlicks. Monetary policy decisions need to based on a number of factors; inflation targeting, yes but also, fiscal policy, current account deficit/surplus, exchange rate, global supply and demand pressures, growth, the overall structure of the economy. This simplistic idea that you can separate off responsibility for base rate setting to achieve an inflation target is pure nonsense as is evident. The responsibility and control for both monetary and fiscal policy to achieve all strategic targets should reside with the elected authority. The BOE governor should not be making any statements about monetary policy decisions or the economy, he should be kept in a box along with all the other civil servants. His crusade to prevent ‘moral hazard’ will end up doing exactly the opposite, the concept people need to grasp is that the banks as an entity do not exist to be punished. They are an organisation comprising of employees, owners and customers who are all being punished in varying degrees because of the current mess. The only people avoiding any kind of hardship at the moment are the architects of the problem, the PM, the chancellor, the governor of the BOE oh and of course the journalists who are no longer just witnesses but who now play major roles in these crisis. Nice work if you can get it! I unfortunately have not been able to avoid the fallout and am about to join the queue of people left without the means to pay for this mess, thanks to all those public servants, doing a Sterling job!
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Interesting question. Do the banks have the legal right to say they will not repay funds held in fixed term deposit accounts? This was HBOS's answer to my enquiry about moving my pension fund account this morning. I understood all accounts were OUR money and fixed terms could be broken into, the only forfeit being the loss of a certain amount of interest. Now they are asserting this is not the case. If we've put the money into fixed term deposits, ie one year, they don't have to release till the year is up. What is other peoples' experience?
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I think LuckyIP (comment 98) is missing the point slightly. Behind the "casino" is the real value of HBoS as a business. The share price, which should reflect this, seems to have been unnaturally depreciated by speculators manipulating the market, in a way that does NOT reflect the actual viability of the institution. If this is NOT the real story, perhaps City correspondents could explain the nature of the share oscillations to the rest of us.
With all that in mind, I'm not sure if I agree with killthehedgies (comment 104) if he's serious that this sell-out is going to "save" HBoS (although I do agree with him on where the blame for this problem basically lies). It looks to me like this solution is founded on City short-sightedness, reflecting the desire of the PM and the London bankers to perpetuate their greed-driven agendas, no matter the cost.
In fact, am I the only person who doubts that Lloyds needed to be pushed by the PM to make a fire-sale-priced takeover of a rival whose actual business is entirely healthy? It simply enmeshes the British financial sector even more in the inept schemes of City speculators. How long until Halloydsfax TSBoS in turn falls victim to the carnivorous culture it belongs to, and has to be taken over by a foreign competitor?
Suspend the HBoS shares, investigate the short-sellers, and tell Lloyds to back off, and Gordon Brown to clear his desk!
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Abusive short selling of HBOS? That sounds like something someone like George Soros might do (not that I am suggesting he is).
Or is there a conspiracy afoot? Is this a Russian/ Chinese/ Arab/... etc. plot to destabalise the West? Good luck to 'em!
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If this comes off, a good name for the bank might be 'The Lloyds Help us Bank' ......
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Hello all, nice to be back.
No mention of all the toxic 'off balance sheet' liabilities in SIVs that still lurk behind the current financial turbulence. We are entering the main phase of the 'credit crunch' and there will be no 'bottom' to all this until ALL liabilities are fully accounted.
Lloyds TSB shareholders, investors, and depositors should be very scared. The involvement of 'Jonah' Brown is worrying indeed! RBS will probably be the next victim offered for sacrifice.
There will be planty more of this to come until there is complete transparency about the real extent of the exposure to bad debt thats out there.
Cheers, RBS shares here we come!
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Hello all, nice to be back.
No mention of all the toxic 'off balance sheet' liabilities in SIVs that still lurk behind the current financial turbulence. We are entering the main phase of the 'credit crunch' and there will be no 'bottom' to all this until ALL liabilities are fully accounted.
Lloyds TSB shareholders, investors, and depositors should be very scared. The involvement of 'Jonah' Brown is worrying indeed! RBS will probably be the next victim offered for sacrifice.
There will be plenty more of this to come, until there is complete transparency about the real extent of the exposure to bad debt out there.
Cheers,
RBS shares here we come!
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Continuation of No 124
Thats it. Dow down.
Batten down the hatches and buy lots of tin soup.
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Why has it been so difficult for retail investors to access accounts and buy/sell HBOS shares today when the institutional guys and hedge funds were having a field day? Smells dodgy to me
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Why do so many so-called capitalists on here whine about short sellin and the impact speculating on the stock exchange has on society as a whole?
That's the free markets. If you don't like free markets you are more than welcome to swap sides and join us, because there is no 'third way' in the long run.
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While the merger is needed at this point, as others have commented such mergers and large banks are what caused this mess in the first place. Once things have settled down in a few years the Govt should encourge the creation of local banks which can only operate on a limited basis outside their own area. This would restrict their ability to borrow or gamble on the wholesale money markets, which would thus have avoided the problems we are now seeing. Had HBOS remained two smaller institutions with some restrictions placed on them I doubt they would have been allowed to borrow 100-150bn in short term bonds and subsequently been unable to refinance them.
The US has bans on gambling across states by companies and private individuals - it seems odd that similar rules do not apply to banks.
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I wonder how 'safe' some of the Building Societies are now, given that there are some pretty big names which are actually smaller than the Derbyshire and the Cheshire? How safe is any Building Society, for that matter, apart from the top 2 or 3?
The Nationwide can't take them all over!
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#129 is right. The competition authorities need to prove they are independent by standing up in public and saying that this emergency legislation to neuter them is wrong.
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You just couldn't make any of this up!!!
Peston, you have been played like a kipper over the share price blunder. But don't stop reporting!
Hovever, for GB to broker this deal and in the process try to disguise it as a white knight (market led) takeover/rescue of HBOS.....and in the process ride rough-shod over the monopolies comission, parliament, and all other due processes....just beggars belief!!!
All he is doing is lining up a final bail-out of all the UK banks together, with tax payers money, when it all really hits the fan some time soon.
This crisis has 100% convinced me that THERE IS NO DEMOCRACY.....it's all a complete sham.
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Our Govt. need to take action and do what the SEC has just done - ban all short selling for the time being.
What the hedge funds are doing at the moment is scandalous. A major UK high street bank having share price movements of 50% both ways in 1 day is ridiculous.
Also re comment no.1 - what does this have to do with a 'Scottish Bank'? In case you dont remember Royal Bank of Scotland bought what was the largest English bank - NatWest. So what? There is no room for nationalism in finance - it is irrelevant.
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I we put our money in a bank be it £5.00 or £35,000 we should be certain it is going to be there when we want it. If I want to risk losing my money I will either put it in shares or tell the nearest burglar which bed it is hidden under.
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The new logo
http://ftalphaville.ft.com/blog/2008/09/17/16018/hows-that-for-a-logo/
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As EUROPE is now responsible for much competition law...
Can you explain how the UK are going to avoid the massive fines etc that 'unfair' state support attracts?
If the british government are supporting a take over of HBOS maybe other (european) organisations would have been interested...
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As a private (small) shareholder in both HBOS and Lloyds TSB I have no problem with either company, nor to a possible takeover/merger. However, as a shareholder, I expect to be asked to vote. This, after all, is the way it's done. The government doesn't own either bank - yet, nor does the FSA.
Your comments relating to the possibility of the government rushing through new legislation to overcome Competition Laws suggests to me that they consider it a done deal and will do whatever necessary to make sure it happens. I object strongly to this. So far, wherever the government rushes through legislation or whatever it meddles in, goes spectacularly wrong. It is in fact due to "meddling" by both the U.S. legislature in the 1990's and to our latest government in attempts to increase the figures of home-owners that this credit crunch has been created in the first place. Had they not interfered and the FSA done it's job properly in the first place, then the financial institutions could not have played fast and loose with our money.
I accept the reassurance from HBOS that they are a viable institution and that with the funds recently raised (some of them mine!) they can weather the storm. This can be easily checked by an independent auditor who can study their liabilities in relation to assets and then advise. Your own opinions also seem to reflect this. If this is the case, then no "rescue" package is necessary, certainly not a "rushed through one" which neglects to put this to the vote of the shareholders.
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Incredible. Bank for sale, a bit wobbly, but includes a freshly rigged mortgage market thrown in for free.
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This sounds like a great deal for Lloyds shareholders. I note various comments about solvency but surely the truth is that HBOS is, on the basis of it's fundementals, entirely solvent. I would go so far as to suggest that Northern Rock was/is solvent. The problem is that if a full scale panic, no matter how ill informed, sets in any bank will be in trouble. Why on earth are people talking about rushing to withdraw say £5000 pounds out of HBOS when all deposits up to £35000 are guaranteed! The market is basically a casino but the real problem is that most of the investors, including the city traders, no nothing about the businesses which they trade in. They make money out of instability so they have a vested interest. Those who suggest HBOS is insolvent have failed to produce any evidence but if you tell a lie often enough some people believe you.
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http://news.bbc.co.uk/1/hi/business/7601459.stm Andy Hornby CEO HBOS interview...only 2 weeks ago...looks like he had good reason to be worried
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RP has to write for a broad audience and the criticism dished out here is way too harsh!
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This deal makes no sense for Lloyds TSB - why take on a world of troubles?
HBOS failure would hit a wide range of counterparties of which it would be a part so why should Lloyds take on the totality of the problem?
If HBOS is too big to fail then 'Lloyds TSB HBOS' at more than twice the size could never be let go. Are Lloyds TSB running for cover out of the back door?
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This comment was removed because the moderators found it broke the House Rules.
Whats the betting that at least a third of the combined workforce is gone within two years.
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Breaking the news on Northern Rock and then following this up with HBOS/Lloyds. Some would say Robert Preston is sailing very close to the wind with these exclusives. Will the FSA be investigating such market abuse, clearly somebody in government is leaking out this sensitive information.
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So how far does Stock lending and shortselling have to go before action is taken to restore order to the market and protect the interests of Pension Funds and small investors?
Or is it accepted by the Government that in future there will be no small shareholders and no one contributing to a Pension Fund ?
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Not sure any of this working FTSE down 98pts Dow down 262 and HBOS are down 47.4 pts (26%) to 134.6pts all at 1630hrs.
What's lacking is confidence and there's less and less of that in the markets with every passing hour!
Emergency legislation to remove competition law! How do the folks at Barclays, HSBC and Nationwide feel about that? Ready to take one for Our Dear Leader, eh boys?
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How much is Gordon Brown being lent on by the US government, I wonder? I ask only because the news that the PM brokering the Lloyds TSB/HBOS merger, and has already announced that he will legislate to over-ride the powers of the Office of Fair Trading and the Competition Commission, is making my hair stand on end. There is another, unseen, variable at work here; and since 1997 that has usually turned out to be the USA's global interests.
On the American forums I read regularly it is generally accepted that the US economy is holed below the waterline, and all the decisions made by the US administration to make it look as if the ship is still afloat are made with just one goal: to get past the American general election without being blamed by the electorate for the recession.
Whose "show" is so important to keep "on the road" that PM Brown must over-ride the OFT and the CC?
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What a nightmare for Lloyds TSB. They have been leant on by Gordon to take on a half baked over stretched mess like HBOS. They'll have to do some extreme asset stripping to make anything out of this deal so loads of jobs will go. I own shares in LTSB and feel pretty depressed about it.
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Mr Preston?!
£3 a share?!?!
How many brown paper bags full of notes did HBOS representatives give u to stoke that ludicrous claim?
Be responsible! Ur reputation depends on it..
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Red Lenin (comment 142): how about just regulating the capitalism more? undiplomatic (comment 143) has a point there, I think.
Yes, that leads to lower growth, but why is that so bad, if it's more stable and sustainable? The economists have been dazzled by abstract ideas that don't work in the real world. Much like communists, with their own vision of an economically-leveraged utopia, perhaps?
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In response to stormy:
"There is another, unseen, variable at work here; and since 1997 that has usually turned out to be the USA's global interests."
UK holding of U.S. Treasury securities: In the space of a year, the UK has increased its holdings from $50 billion to $280.4 billion. Since June 2007 the country has gone from being the 8th largest foreign holder to the 3rd largest.
Statistics here:
http://www.treas.gov/tic/mfh.txt
The only way I can realistically see for us out of this kind of - ever repeating - morass is something as radical as the UK Libertarian economic policy:
http://lpuk.org/pages/manifesto/economy.php
The big three only mean more of the same: Corporatism as the norm.
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Message to mods: sorry just realised my last comment breaks the house rules.
In response to stormy:
"There is another, unseen, variable at work here; and since 1997 that has usually turned out to be the USA's global interests."
UK holding of U.S. Treasury securities: In the space of a year, the UK has increased its holdings from $50 billion to $280.4 billion. Since June 2007 the country has gone from being the 8th largest foreign holder to the 3rd largest.
Statistics available at the US Treasury department website. I'd post a link if I was allowed, unfortunately you'll have to look it up yourself.
The only way I can realistically see for us out of this kind of - ever repeating - morass is something as radical as the UK Libertarian economic policy.
The big three only mean more of the same: Corporatism as the norm.
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The takeover panel is clear.
An announcement is required:—
... when, following an approach to the offeree company, the offeree company is the subject of rumour and speculation or there is an untoward movement in its share price;
when, before an approach has been made, the offeree company is the subject of rumour and speculation or there is an untoward movement in its share price and there are reasonable grounds for concluding that it is the potential offeror’s actions (whether through inadequate security or otherwise) which have led to the situation
Was this BBC announcement inside information?
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#161
"How much is Gordon Brown being lent on by the US government, I wonder? I ask only because the news that the PM brokering the Lloyds TSB/HBOS merger, and has already announced that he will legislate to over-ride the powers of the Office of Fair Trading and the Competition Commission, is making my hair stand on end"
Not only is my hair standing on end my anger is also evident.
How can a government put in place quangos which are over-rided?
HBOS has never been ailing; I'm sick of hearing it is. In fact, I'd go as far to say that Gordon Brown doesn't mind sacrificing the oldest bank on this island to suit his polltical ends.
The whole affaire stinks. Northern Rock were mainly 'sub-prime' mortgage suppliers. HBOS (the BOS bit) has the most stable monetary balance in the UK.
I'm Scottish. Do I feel someone somewhere is trying to break the oldest (plus the first bank on this island to print paper money) bank in the uk? Yes I do. It suits Westminster to make Scotland scapegoats because they think middle England will believe they're looking after their interests.
Take a wee tip from me Gordon. It doesn't matter if you're English, Scottish, African, Chinese etc., we all need money or some kind of bartering to survive.
Middle England won't be impressed by your actions in setting up this take-over. In fact quite the opposite. They expect you could have done a great deal more to usurp the speculators in the last couple of weeks. You did with Northern Rock. But hey! Don't let votes get in the way of caring for the country - and I mean the whole of the UK. Scotland has been dealt a sh!t hand with your behaviour to do with HBOS but then it always has.
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Re: #135 tartan_tory
I think LuckyIP (comment 98) is missing the point slightly. Behind the "casino" is the real value of HBoS as a business. The share price, which should reflect this, seems to have been unnaturally depreciated by speculators manipulating the market, in a way that does NOT reflect the actual viability of the institution. If this is NOT the real story, perhaps City correspondents could explain the nature of the share oscillations to the rest of us.
To answer the question you pose in last sentence, I shall quote Ben Graham:
“In the short-run, the market is a voting machine but in the long run, the market is a weighing machine.”
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For anyone who thought RP actually reads these comments left on his blog, this myth was clearly dispelled tonight when, on the Ten O'Clock News, he announced that where financial institutions are conerned, bigger is safer (I'm paraphrasing).
Not that anybody with an ounce of financial nouse would advise that diversification is sine qua non the best way to reduce risk...
Or in layman's terms, eggs and baskets 8-)
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What a mess.
Ah Well carry on wih the absurd bonus schemes, keep paying them a fortune and then bail them out.
If this was you or I we would have been sacked and lost our house. No jobs for life anymore, well unless you work for HBOS, AIG, Fanny etc etc.. then doesn't matter how big a mess you make you get paid a fortune and are un sackable.
Poor Nick Leeson got jailed, AIG Ceo gets 22Million !!
How much am I paying those idiots at the FSA, they just sit back and allow shortcuts and no long term strategy, as anyone in finance, they only look to the next bonus and who cares as long as I make the year target.
The only positive note is no more of thse bloody awlful ads saying 'keep money aside for a rainy day' talk about practising what you preach.
Who on earth though making a building society a bank was a good idea and then to get the cnsumers to say yes bribe them with a grand. Surprised when the greed said yes !
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And while I'm in a pedagoguic mood, have a look at this article. For example, this paragraph seems particularly apposite in the current climate:
"Even so, the Panic of 1907 was like many of the crises that went before it and would happen after it. It was inevitable, because highly leveraged and overextended lenders and speculators lead to eventual ruin."
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i think that lloyds tsb and HBOS merging is a good idea because it means that the bank has more money and is at less of a risk of going bankrupt.
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After what has happened to HBOS there should be a tightening of the way to invest and buy shares legitimately. Short buying shouls be outlawed. To trade shares you should own them not borrow them. I have been with Halifax as a saver and borrower for over 40 years and never thought I would see the day when they were in trouble. I think one way to safeguard these companies is as I have described above.
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YummyCarolKirkwood (Comment 169)...
"In the short-run, the market is a voting machine but in the long run, the market is a weighing machine."
An aphorism isn't an answer, is it?
If your comment is meant as a defense against the idea that the current HBoS share price is misrepresentative, I'm not following how it works.
This isn't long-run "weighing", and the theory depends on the assumption that the individuals who make up the market don't manipulate it for selfish, short-term or straightforwardly misguided ends.
What's the technical term for the opposite of a bubble? Is there even a clear concept of one?
I can understand that the HBoS share price decline has unnerved big lenders and forced the sale, but that may just underline the knock-on effects that manipulation can have.
Yes, there's also some sort of concern about loans needing renewed in a few months' time, but that's no justification for a hurried sale, is it? How does this share price compare to the HBoS asset value, too?
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Re: #175 tartan_tory
Your question was:
"If this is NOT the real story, perhaps City correspondents could explain the nature of the share oscillations to the rest of us."
The answer is that there is no explanation (although "market manipulation by evil shorters" is ALWAYS wheeled out in one form or another as the reason behind sharp price falls during market panics - shorting was banned in the US after the 1929 crash, for all the actual good that did). In the short term, the market is IRRATIONAL, and therefore by definition cannot be explained. I thought the famous aphorism I quoted summed this up fairly succinctly?
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Uhhh....
Some movements can be explained.
For instance... yesterday morning at 9am, this blog article that we're replying to caused a marked rise in HBoS Stock.
So, what's causing the downward pressure? Do economists really say it can't be short-selling, because markets are inherrently inexplicable?
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Re: #177 tartan_tory
Don't worry, you're just responding to the overwhelmigly strong innate human desire for a rational explanation to everything observed.
There is, of course, a fundamental explanation to all stock movements: the basic economic tenet of supply and demand. If there is a significant imbalance between the number of shares bought versus the number of shares sold, the price will move accordingly. The market makers are simply responding to the supply/demand dynamic - THEY DON'T CARE ABOUT THE "VALUE" OF THE SECURITY! They make their money from the spread, so volume is what is important to them, not price, provided they don't end up too long or short. And since the stock transactions they handle are motivated by the sentiment (which is not rational) of the buyer/seller, there is thus no such rational explanation for the movements such as the one you are looking for. It's an uncomfortable fact that you need to accept in order to really understand how markets work.
It always makes me smile when I read market reports "explaining" why the FTSE went up or down on that particular day - they always make the facts fit the effect. Had you not noticed?
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YummyCarolKirkwood (comment 178): aren't you doing the exact same thing, though?
You're "explaining" the markets with a model of pyrrhonist incomprehensibility that requires you to discount the possibility that there may be explicable (and indeed malicious and preventable) factors involved.
Can you explain why manipulators CAN'T shift the supply/demand balance themselves (for instance, by selling lots of shares they don't own at an abnormally low price, which will trigger a fall so they can then buy them back even lower)....?
Of course, if you accept that the markets can be explained and manipulated to an extent, that calls into question the ideology from which City cutthroats have profited at the expense of the "real economy" (i.e. everyone else).
Why the refusal to admit the possibility?
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IAS39 brought in mark to market accounting practices. This is all fine and dandy is normal market conditions, but in a “crash” mark to market valuations can become very distorted and unrealistic (due to the temporary but severe skew in the supply-demand). This forces financial companies to effectively take right-downs or impairments that have not actually been realised yet – against which they are forced to increase reserves and capital (both regulatory and economic capital). This forces them to go out and try raise additional capital in a market that has no appetite to capitalise financial firms at a cost effective rate (or at all!).
Solution:
1. The governments / exchanges should create a sovereign credit benchmark rate / curve that all other credit is priced from.
2. Key plain-vanilla credit derivative products should be executed via an exchange and exchange controlled benchmark index. In this way a “market curb / circuit -breaker” mechanism can be put in place to prevent the “death-spiral” or credit spreads.
3. Key plain vanilla credit derivative products should be novated and cleared via a Clearing House. In this way the core credit derivative interbank market can be confident that their market counterparty is going to be there next week, and the week after!
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