HBOS And Lloyds 'Agree Takeover'

[Spike]

[glow=black]Halifax Bank of Scotland and Lloyds TSB have agreed a takeover deal, according to Sky News sources.[/glow]

Details of the merger are to be announced on Thursday, they added.
Sky business correspondent Joel Hills said: "It's a straight-forward takeover deal. HBOS, I have been told, has conceded there's been a total failure of confidence in the business model despite constant reassurances that ... they have raised the money they need to, that they were not having funding difficulties."

He said: "I think it's very clear that there were two big issues, with the fall in share price reflecting concerns about its exposure to the capital market and that it was struggling."

[glow=red]Other banks, particularly foreign ones,
were reluctant to lend to HBOS,
seeing it as potentially being exposed,
particularly because it's a big UK operator -
particularly because it's the UK's biggest mortgage lender
and house prices in the United Kingdom are falling.[/glow]
Sky News business correspondent Joel Hills

Earlier, Patrick Hosking, banking and finance editor of the Times newspaper, told Sky News that a senior banker estimated that 40,000 jobs could go as a result of a deal.

Shares in HBOS had taken a hammering since the weekend but recovered markedly as reports of the talks emerged. They soon slumped by more than 50% when the FTSE 100 opened, but then shot towards the top of the Footsie risers board, with an immediate gain of 12%. Lloyds TSB was nearly 2% up. If the two businesses come together as expected, they would create a British banking colossus. Lloyds TSB wrote 24% of all new mortgages during the three months to the end of June.

It is also the UK's third biggest savings bank with £65bn saved through it - and Cheltenham & Gloucester - and the country's biggest current account provider. HBOS is Britain's largest lender and biggest private savings bank, holding more than £250bn of ordinary deposits from 15 million savers.
But following the fall of Lehman, investors rushed to dump shares.

The trouble was exacerbated when credit rating agency Standard & Poor downgraded HBOS, saying that it was "less well positioned to manage the deteriorating operating environment" than its rivals. Before trading began on Wednesday, it had seen around [glow=black]£3bn wiped off its market value.[/glow]