Glimmer of hope for 2.1 million shareholders

This is not just because the Government is doing everything it can to make the deal happen, including bending the competition laws.

It is because at whichever level you look at today's trading statements from the two banks, things have got much worse in the past three months than they were in the first six months of the year.

HBOS virtually admitted today that for some six weeks — until the Government and Lloyds stepped in — it was suffering a withdrawal of savings which came close to being a run on the bank.

Its write-downs and losses on toxic assets and bad loans topped £5 billion in the first nine months of this year and the credit crunch is clearly far from over.

Mutterings from north of the border, where HBOS has headquarters and a vital by-election is being held, that there may be a rival bid will almost certainly come to nothing.

There are not just political interests involved in the Lloyds HBOS deal but also some of the biggest egos in the banking world.

Any alternative to a takeover of HBOS is pretty much unthinkable.

The Government will not allow a major consumer bank to go bust. Nor could it contemplate a full hnationalisation in the way it dealt with Northern Rock at the start of this year.
Depending on which measure you choose, HBOS is anything from five to 10 times the size of Northern Rock. That would just be too much for the nation's finances.
At the same time HBOS has Britain's biggest shareholder base. Following the stock market flotation of Halifax in 1997 when the former building society's members were all given free shares, there remain 2.1 million private investors in the bank.
They have already seen their shares lose 90 per cent of their value in the past 16 months. Even the 119p offer from Lloyds is better than the nil pence nationalisation would probably have produced.
There is even a glimmer of light in today's details with the news that the Treasury is keen for the expanded Lloyds to buy back the Government's £4 billion of preference shares as soon as it can. That in turn would allow the new "super retail bank" to restart paying dividends to those millions of shareholders. Previously City analysts had not expected dividends to restart until 2012 at the earliest.