Banking giants set to merge

BANKING giants Lloyds TSB and HBOS were today understood to be in advanced merger talks as pressure on the beleaguered mortgage lender continued.

Paul Geater

BANKING giants Lloyds TSB and HBOS were today understood to be in advanced merger talks as pressure on the beleaguered mortgage lender continued.

Shares in HBOS - which owns the Halifax and the Bank of Scotland - dipped again today after an early morning rally until details of the proposed merger were revealed.

City insiders believe that Lloyds TSB is prepared to pay £3 for every HBOS share - today they were trading at nearer £1 a share - in a move which would create Britain's biggest bank.


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Shares in HBOS had been under pressure all week because the company relies so much on the British mortgage market and it relies on inter-bank loans to help finance its activities.

Lloyds TSB bought Cheltenham and Gloucester several years ago and if the deal goes through would be expected to create a new mortgage giant.

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Staff in the Ipswich branches of Halifax and Bank of Scotland will be anxiously watching the news - there are already two major branches of Lloyds TSB on either side of the Cornhill and a large Halifax branch nearby in the Buttermarket.

Earlier, shares in HBOS dived as much as 50 per cent, but recovered to 7pc down after the report from the BBC.

The broadcaster said HBOS and Lloyds TSB were in "advanced" talks over a combination.

Asked about the discussions, an HBOS spokesman declined to comment.

Other UK banks were also continuing to come under pressure in the fallout from the collapse of Lehman Brothers.

The Royal Bank of Scotland group, which includes National Westminster, has lost 18 pc of its value this week while Lloyds TSB itself has lost 7pc.

One bank that has bucked the trend is Barclays which saw its value climb by 7pc after it emerged it was buying profitable sectors of Lehman Brothers' business in the US.

At 6pm today, the value of HBOS shares was 147p, a drop of almost 35p. Lloyds TSB shares were trading at 279.75p.

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