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=== Lloyds TSB acquisition in doubt ===
=== Lloyds TSB acquisition in doubt ===
The New York's Attorney General investigation into short selling of bank stock, including that of Lloyds TSB and HBOS, may ultimately put an end to the takeover of
The New York Attorney General's investigation into short selling of bank stock, including that of Lloyds TSB and HBOS, may ultimately put an end to the takeover of
HBOS by Lloyds TSB. With their coffers rapidly emptying British officials are urgently seeking other methods of re-capitalising the
HBOS by Lloyds TSB. With their coffers rapidly emptying British officials are urgently seeking other methods of re-capitalising the
bankrupt British banks before another share price crash. A number of sovereign wealth funds have researched and rejected the acquisition of
bankrupt British banks before another share price crash. A number of sovereign wealth funds have researched and rejected the acquisition of

Revision as of 15:59, 18 November 2008

HBOS PLC
Company typePublic (LSE: HBOS)
IndustryFinance and Insurance
Founded2001
HeadquartersUnited Kingdom Edinburgh, Scotland, UK
Key people
The Lord Stevenson of Coddenham CBE, Chairman
Andy Hornby, CEO
ProductsFinancial Services
Revenue£21,291 million (2007)
£5,149 million (2007)
£4,109 million (2007)
Number of employees
72,000
Websitewww.hbosplc.com
Group headquarters on The Mound, Edinburgh.
HBOS Office at Trinity Road, Halifax.
"Blue Leany" Office in Aylesbury, Buckinghamshire.
HBOS offices in Lovell Park, Leeds, formerly that of the Leeds Permanent Building Society, before their takeover by the Halifax Building Society.

HBOS plc (LSE: HBOS) is a banking and insurance group in the United Kingdom, the holding company for Bank of Scotland plc, which operates the Bank of Scotland and the Halifax bank; HBOS Australia, and HBOS Insurance & Investment Group Limited, the group's insurance division. Although officially HBOS is not an abbreviation with any intrinsic meaning, it is widely recognised as an initialism for Halifax Bank of Scotland. The corporate headquarters of the group are in Edinburgh, Scotland; the old head office of the Bank of Scotland. Operational headquarters are based in Halifax, West Yorkshire, England; the old head office of Halifax.[1]

HBOS was formed by the 2001 merger of Halifax plc and the Governor and Company of the Bank of Scotland,[2] and the formation of HBOS was heralded as creating a fifth force in British banking as it created a company of comparable size and stature to the established Big Four UK retail banks. It is also the UK’s largest mortgage lender.[3] HBOS is a public limited company listed on the London Stock Exchange. A reorganisation of the group initiated by the HBOS Group Reorganisation Act 2006 saw the transfer of Halifax plc to the Governor and Company of the Bank of Scotland, which was now a registered public limited company, Bank of Scotland plc.

On 18 September 2008, Lloyds TSB plc officially announced a confirmed agreement to take over HBOS plc in a deal worth £12.2 billion (US$21.85-billion). Lloyds stated that it would continue to use 'The Mound' as the headquarters for its Scottish operations and would continue the issue of Scottish bank notes.[4][5]

History

Formation

The Bank of Scotland is the UK's oldest commercial bank, by an Act of the Parliament of Scotland in 1695. Halifax was founded in 1853 as the Halifax Permanent Benefit Building and Investment Society, which demutualised in 1997 to become a public limited company (plc).[6]

The merger of the Bank of Scotland and Halifax occurred in 2001[2] during a wave of consolidation in the UK banking market which began in the late 1990s. The Bank of Scotland played a key role in the process, firstly by launching a hostile takeover bid for NatWest, although the bid failed to a rival offer from the Royal Bank of Scotland. It later investigated a merger with Abbey National, when Halifax approached with an offer to merge.

The merger created the fifth largest bank in the UK by market capitalisation.

HBOS Group Reorganisation Act 2006

Main article: HBOS Group Reorganisation Act 2006

In 2006, HBOS secured the passing of the HBOS Group Reorganisation Act 2006, a private Act of Parliament that would allow the group to operate in a more simplified structure.[7] The Act allowed HBOS to make the Governor and Company of the Bank of Scotland a public limited company, Bank of Scotland plc, which became the principal banking subsidiary of HBOS. Halifax plc transferred its undertakings to Bank of Scotland plc, and although the brand name was retained, Halifax then began to operate under the latter company's UK banking licence.

The provisions in the Act were implemented on 17 September 2007.

2008 short selling and credit crunch

In March 2008, HBOS shares fell 17 percent amid false rumours that it had asked the Bank of England for emergency funding.[8] The Financial Services Authority conducted an investigation as to whether short selling had any links with the rumours. It concluded that there was no deliberate attempt to drive the share price down.[9]

On 17 September 2008, very shortly after the demise of Lehman Brothers, HBOS's share price suffered wild fluctuations between 88p and 220p per share, despite the FSA's assurances as to its liquidity and exposure to the wider credit crunch.[10]

However, later that day, the BBC reported that HBOS was in advanced takeover talks with Lloyds TSB to create a "superbank" with 38 million customers. This was later confirmed by HBOS. The BBC suggested that shareholders would be offered up to £3.00 per share, causing the share price to rise, but later retracted that comment.[11][12] Later that day, the price was set at 0.83 Lloyds shares for each HBOS share, equivalent to 232p per share,[13] which is less than the 275p price at which HBOS raised funds earlier in 2008.[14]

In order to avoid another Northern Rock-style collapse, the UK government announced that should the takeover go ahead, they would allow it to bypass competition law.

Alex Salmond, Scotland's First Minister, previously an economist, said of the takeover:

"I am very angry that we can have a situation where a bank can be forced into a merger by basically a bunch of short-selling spivs and speculators in the financial markets."[15]

Vince Cable, Liberal Democrats spokesman labelled the hedge funds which profit from short-selling as "masters of the universe".[16]

Takeover by Lloyds TSB

On 18 September 2008 the terms of the recommended offer for HBOS by Lloyds TSB were announced. The deal is expected to be completed by the end of 2008 or early 2009. The three main conditions for the acquisition are:

  • Three quarters of HBOS shareholder votes in agreement with the board's actions;[5]
  • Half of Lloyds TSB shareholder votes to approve the takeover;[17]
  • UK government dispensation with respect to competition law.

Most of the shareholding votes at HBOS are in the hands of institutional investors and it is anticipated that takeover will proceed to a successful conclusion.

Prime Minister Gordon Brown personally brokered the deal with Lloyds TSB, an official said: “It is not the role of a Prime Minister to tell a City institution what to do”.[18] The Lloyds TSB board have stated that troubled banks Merrill Lynch and Morgan Stanley were amongst the advisers recommending the takeover.[5]

Bailout

On October 13, 2008, Gordon Brown's announcement government must be a "rock of stability," resulted to an "unprecedented but essential" government action: the Treasury would infuse £37 billion ($64 billion, 47 billion euros) of new capital-bailout into Royal Bank of Scotland Group Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse or UK "banking meltdown". He stressed, however, that it was not "standard public ownership" for the banks would return to private investors "at the right time."[19][20] Alistair Darling stated UK taxpayers would benefit from the government's rescue plan, for it will have some control in RBS in exchange of about £20 billion from the taxpayer. Total ownership in RBS would be 60%, with the figure for HBOS 40%.[21] Royal Bank of Scotland stated it intended to raise 20 billion pounds ($34 billion) capital with government's aid, amid its chief executive Fred Goodwin's resignation. The government acquires $8.6 billion of preference shares and underwriting $25.7 billion of ordinary shares. Thus, it intended to raise 15 billion pounds (18.9 billion euros, 25.8 billion dollars) from investors, to be underwritten by the government. Taxpayers' money will buy 5 billion pounds of shares from RBS, amid Barclays bank raising 6.5 billion pounds only from investors, instead of government help.[22] Reuters reported Britain could inject 40 billion pounds ($69 billion) into the said 3 banks including Barclays.[23]

Scandal and recent developments

On 8 October 2008, HBOS's Australian arm BankWest, was acquired by the Commonwealth Bank of Australia for $2.1 Billion dollars (AU).[24]

In November 2008, a scandal erupted when it was reported that HBOS executives had sexual intercourse with a female colleague at Rowton Hall Hotel and that drugs were involved. The drug-fuelled orgy occurred during an awards ceremony just two days after a sharp plunge in HBOS's share price. Since then, the bank has taken £11.5bn in taxpayer money to avoid plunging further into crisis.

Lloyds TSB acquisition in doubt

The New York Attorney General's investigation into short selling of bank stock, including that of Lloyds TSB and HBOS, may ultimately put an end to the takeover of HBOS by Lloyds TSB. With their coffers rapidly emptying British officials are urgently seeking other methods of re-capitalising the bankrupt British banks before another share price crash. A number of sovereign wealth funds have researched and rejected the acquisition of HBOS and the future of the bank is again being mooted by very senior British politicians and the Bank of England. Reputations are inevitably at stake. A takeover by one Sovereign Wealth Fund, from the Far East, had been given the OK by Whitehall; however HBOS was considered too lame a duck to fly. [25]


Operations

HBOS conducts all its operations through three main businesses:

  • Bank of Scotland plc
  • HBOS Australia
  • HBOS Insurance & Investment Group Limited

Bank of Scotland plc

Bank of Scotland plc is the banking division of the HBOS group, and operates the following brands:

United Kingdom

International

HBOS Australia

HBOS Australia was formed in 2004 to consolidate the group’s holdings in Australia. It consists of the following subsidiaries:

On 8 October 2008 HBOS Australia sold its Bank of Western Australia subsidiaries to Commonwealth Bank of Australia.[24]

HBOS Insurance & Investment Group Limited

HBOS Insurance & Investment Group Limited manages the group’s insurance and investment brands in the UK and Europe. It consists of the following:

References

Notes

  1. ^ "Bank of Scotland, Halifax tie knot". All Business. Retrieved 2007-07-02.
  2. ^ a b "HBOS: the issue explained". Guardian. 2001-05-04. Retrieved 2008-09-17.
  3. ^ "HBOS is the largest mortgage lender in the Isles". 2008-08-07. Retrieved 2008-09-17.
  4. ^ "Lloyds TSB confirms deal to take over HBOS". 2008-09-18. Retrieved 2008-09-18.
  5. ^ a b c "Recommended acquisition of HBOS plc by Lloyds TSB Group plc" (PDF). Lloyds TSB. 2008-09-17. Retrieved 2008-09-18.
  6. ^ "Halifax could have another £3bn to hand out". 1997-03-06. Retrieved 2008-09-17.
  7. ^ "HBOS Group Reorganisation Act 2006". 2006. Retrieved 2008-09-17.
  8. ^ "Authorities avert run on HBOS caused by false rumours". 2008. Retrieved 2008-09-17.
  9. ^ "FSA concludes HBOS rumours investigation". 2008. Retrieved 2008-09-17.
  10. ^ "HBOS Statement". 2008. Retrieved 2008-10-11.
  11. ^ "HBOS in merger talks with Lloyds TSB". BBC News. 2008-09-17. Retrieved 2008-09-17.
  12. ^ "HBOS confirms in takeover talks with Lloyds TSB". 2008-09-17. Retrieved 2008-09-17.
  13. ^ "Lloyds seals deal for HBOS". Reuters. 2008-09-18. Retrieved 2008-09-18.
  14. ^ "Lloyds TSB takeover talks with HBOS: the key issues". Guardian. 2008-09-17. Retrieved 2008-09-17.
  15. ^ "Salmond attacks financial 'spivs'". BBC News. 2008-09-17. Retrieved 2008-09-17.
  16. ^ "Critics blast 'spivs' over HBOS bank merger". Metro. 2008-09-17. Retrieved 2008-09-17.
  17. ^ "Lloyds TSB - Your shareholder questions answered". Lloyds TSB. Retrieved 2008-11-03.
  18. ^ "Gordon Brown steps in to secure HBOS rescue". The Times Online. 2008-09-17. Retrieved 2008-09-18.
  19. ^ news.bbc.co.uk, Brown: We'll be rock of stability
  20. ^ bloomberg.com, Stocks Rebound After Government Bank Bailout; Lloyds Gains
  21. ^ guardian.co.uk, Darling: UK taxpayer will benefit from banks rescue
  22. ^ afp.google.com, Britain to invest up to 37 billion pounds in ailing banks
  23. ^ reuters, British banks set for 40 billion pound rescue: sources
  24. ^ a b Australia's CBA to buy BankWest for $1.5bn
  25. ^ HBOS plc acquisition

Bibliography

  • Alan Cameron, Bank of Scotland, 1695-1995: A Very Singular Institution, Mainstream Publishing (20 April 1995), ISBN 1851586911
  • Peter Pugh, The Strength to Change: Transforming a Business for the 21st Century, Sponsored Publishing (29 Oct 1998), ISBN 0670880493

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