Britain’s Lloyds TSB’s has sealed a rescue takeover of Halifax Bank of Scotland, creating a hugely dominant mortgage and savings bank in the UK.
The move comes after HBOS shares were battered in the past week by fears it was struggling to raise funds.
That angered one HBOS employee who said the fears were unjustified: “All it is is just a crisis of confidence, our bank is just as good as any bank, but all you need is for one person to say that HBOS is in trouble and everyone jumps on the band wagon and it is very difficult to stop that band wagon when it is moving in that direction.”
The deal was helped through by the UK government making a change in competition law to ensure the credit crunch did not claim another victim.
Prime Minister Gordon Brown explained: “We’ve taken the right, the decisive and the tough decision that was necessary to protect the stability of the financial system and to protect the depositors and we’ve done so, as with Northern Rock, because it was necessary to get the financial system moving forward today.”
Ordinarily, a merger that gives one company more than a quarter of the market would be referred to the competition authorities.
Together the two banks have 28% of the UK mortgage market, as well as what Lloyds called very comfortable reserves of 100 billion euros and 38 million customers.
Lloyds said it expects the all share purchase to boost its annual earnings by 1.26 billion euros a year by 2011 through cost savings. But analyst said the cost savings could be even higher.
The deal values HBOS at 15.5 billion euros; that is only a quarter of what it was worth a year ago.