Lloyds TSB to take over HBOS

19 September 2008

Move has shocked the UK economy

Lloyds TSB has confirmed that it will be merging with HBOS in a move that would create the UK’s largest bank.

The merger, which would ordinarily not be allowed, will be made possible because of a waiver of competition regulations that would normally stop one bank possessing such a large share of the market, according to reports.

By merging, the Lloyds TSB-HBOS ‘superbank’ will control 28% of the mortgage market and 24% of the savings and current accounts market.

Similar bids have been disallowed in the past because the Competition Commission said it was unacceptable for one bank to have more than 25% of the retail banking market.

Sir Victor Blank, chairman of Lloyds TSB, commented on the merger: “This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group.”

Dennis Stevenson, chairman of HBOS, said: “This is the right transaction for HBOS and its shareholders.

“Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.

“In addition, the combined group will have excellent brands and a very powerful franchise. We are recommending our shareholders vote for this transaction,” he added.

The takeover was proposed because HBOS was falling as a result of market uncertainty. HBOS share prices dropped by over 50% in one day because of rumours it was struggling to cope as a result of its ‘risky lending’.