Tonight:
8°c
Brown orders merger bid to save Halifax
Jonathan Prynn, Consumer Affairs Editor17.09.08
- Commentary: They just can't let Halifax go down in Britain
- £48bn rescue plan for AIG, the giant they could not allow to fail
- The Treasury steps in to broker merger
- Commentary: Sale will signal end to the panic and create calm
- I want my £100,000 out of Halifax
- Man with Asda habit v the Quiet American
Lloyds TSB is in talks to merge with HBOS in the biggest banking rescue in British history.
The emergency discussions have been personally overseen by Gordon Brown and came as HBOS shares plummeted for a third day, at one stage wiping 50 per cent off the value of Britain's biggest mortgage lender.
But the turmoil in world markets showed no sign of abating with the Dow Jones falling 189 points on fears that investment banking giant Morgan Stanley will be the next victim. A merger of HBOS and Lloyds would create a superbank with assets of around £1trillion. Staff at HBOS's London headquarters said there was "a feeling of trepidation" about its loss of independence. It is almost certain to result in substantial job losses.
The talks were ordered by the Prime Minister as speculators launched waves of attacks against HBOS, which owns former building society Halifax and the Bank of Scotland as well as Birmingham Midshires, Clerical Medical and Intelligent Finance. Mr Brown is understood to have spoken first to Lloyds TSB chairman Sir Victor Blank, who he has known for many years, at a City function on Monday night. The Prime Minister also contacted HBOS chairman Lord Stevenson, who is an adviser to the Government on education.
One senior government figure said: "We are very confident this will happen. It is an amazing deal for Lloyds TSB. If this doesn't go through then we are running out of ideas."
HBOS issued a statement confirming the talks this afternoon. It said: "In the light of market speculation, the Board of HBOS confirms that it is in advanced talks with Lloyds TSB Group which may or may not lead to an offer being made for HBOS."
The deal is said to value HBOS shares at £3 each, roughly the price they stood at on Friday before this week's stock market frenzy. HBOS shareholders would be paid in Lloyds shares rather than cash, according to the BBC.
A merger would create a banking giant with around a third of all current accounts in Britain and 28 per cent of the mortgage market. Normally such a combination would expect to fall foul of the competition authorities in Britain and Brussels. However, given the extreme gravity of the situation, the deal is likely to be waved through.
Reports of the merger talks helped lift shares in HBOS. Lloyds TSB shares were also up. The latest developments in the City overshadowed another day of economic bad news. Unemployment rose by 81,000 to 1.72 million, its highest level since 1999.
At HBOS's London headquarters staff said they had been told little about what is to happen to the bank.
Business consultant Tearri Richards, 33, said: "I think there is a feeling of trepidation. Communication is limited at this stage. We have been told it is a difficult time but the balance sheet shows there is a resilience. I think HBOS is bearing a lot of the brunt for wider industry problems. Regulation has been part of the problem and also contagion."
Reader views (12)
Another detail which should be considered in the current climate is the amount of bank charges which may have to repaid to customers although this is obviously pending the outcome of the court of appeal case.
If Halifax are to be taken over by LLoyds will they still honour the payments to customers if the bank charges are found to be unlawful? Are Lloyds going into the deal with their eyes closed and will the liability simply pass to them?
- K Liverpool, Liverpool, Merseyside
Ordering? Crash Gordon?!?? This government brought our economy ruin...
- Jacqueline, Hampstead, London
I can't believe this is happening. Where are you supposed to keep your money safe ?. Every customer should be given a windfall to compensate for stress and worry caused. What about the staff, how many more people will lose their jobs ?
- Debbie,, Kingstanding,Birmingham
Dear 'hopeful'. Sorry, your mortgages stays as is if the bank gosts belly up. Unfortunately this is where those offset mortgages slap you in the face - your savings will be gone, but you mortgage will stay....
Surely it is time the FSA regulate to stop this short-term bonus culture in the investment banks and get them back to salary and security.
- Donald, London
Will you loose your savings. No of course not!! You are covered up to 35000. But you may get a windfall like other mergers that have happened. A exra 1000 in the bak for free would be good 
You never know as there has been no agreement NOT to give out a windfall on merger!
- Steve Edding, Leeds
at this rate the only safe place for our money WILL be under the mattress!
- Em, london
I was told be an insider last Friday that if your a saver, it would be wise to take your money and place it under your matress, rather than leaving it HBOS.
The fact that we have reassurances from hbos that it was fine yesterday, but today they are in talks with a merger with lloydstsb, I wonder if we are getting the real truth as to how close this bank is to bankrupcy!
- Raminder Bhalla, Northolt
Ive always wondered - if one has debt with a bank that goes bust, does that debt "disappear"? I hope so!
- Hopeful, London
Sadly this is all due to last week's experiment in CERN. They created a 'black hole' followed by a 'worm hole' in space. We were sucked through this and are now in a parallel world. This one is heading into a deep recession whereas the other is recovering!
- Michael, London
In about 10 years time there will be a single bank that will emerge after swallowing up all the other banks. The only problem is that they will have no-one else to trade with.
- Adam, Harrow, UK
errrr-no monopolies commission , by your leave, competition commissions-nothing, no FSA comment?
- Amoreno, luxembourg
What does this mean for savers, will we lose our money
- L Weeks, Lincs, UK
