No comment on bank 'takeover deal'

9:37pm Wednesday 17th September 2008

• Play Video

Lloyds TSB declined to comment on a report that it has sealed a dramatic rescue of ailing mortgage giant Halifax Bank of Scotland.

Sky News, quoting sources, reported that a takeover deal had been agreed.

However a spokesman for Lloyds TSB said there was no comment, as did a spokesman for HBOS.

Earlier HBOS, whose share price plunged by as much as 70% this week amid funding worries, confirmed it was in "advanced talks" over a merger that would create a £30 billion banking giant with nearly a third of the UK mortgage market.

It is thought the Government may waive competition rules to get the transaction over competition hurdles, and reportedly follows talks between Lloyds TSB chairman Sir Victor Blank and Prime Minister Gordon Brown. The Treasury and the Financial Services Authority have also been involved.

A takeover of HBOS would end uncertainty about the health of the bank, but there were immediate fears about the implications for the 135,000 UK staff employed by both firms - 65,000 by HBOS and the remainder at Lloyds TSB.

Alex Salmond, the First Minister of Scotland - where around 17,000 HBOS jobs are based - attacked the "spivs and speculators" he blamed for targeting the Scottish-based bank. He said any merger between the two should be based on measured discussion, not a "shotgun marriage" driven by speculation.

Lloyds TSB is reportedly willing to pay no more than £2 a share for HBOS, less than a fifth of the stock's value last summer.

That would be bad news for the company's two million smaller shareholders, many of whom picked up their holdings when Halifax demutualised more than a decade ago.

HBOS is the UK's biggest mortgage lender and savings bank, with an estimated 20% share of the mortgage market at the end of last year and 22 million customers. Lloyds TSB, which does the bulk of its mortgage lending under its Cheltenham & Gloucester brand, is the UK's third biggest lender in terms of outstanding home loans. At the end of June it had 9% of the UK mortgage market.