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For decades Lloyds TSB was the dullest bank in the high street, and the City loved that conservatism and restraint.
Its rivals greeted the Big Bang in the mid-Eighties, which allowed retail banks to get together with investment banks, with wholehearted enthusiasm. Lloyds remained silent on the sidelines.
When Royal Bank of Scotland drove its growth by expanding into the United States and Barclays moved across Africa and the Middle East, Lloyds stayed pretty much at home.
The most exciting thing that happened was when Lloyds merged with the even more traditional TSB, the former Trustee Savings Bank, in 1995.
Investors applauded Lloyds' conservatism and in particular loved its steady and reliable dividend pay-out.
But the black horse has met the black hole. Conservatism is ancient history and dividend pay-outs look a distant dream.
Gordon Brown gave Lloyds chairman, Sir Victor Blank, the go-ahead to take over HBOS at a party organised by Citigroup in Spencer House last year. Competition rules were set aside in a deal which saved the Government from yet another bank nationalisation.
Lloyds chief executive Eric Daniels called it a "compelling business combination."
Mr Daniels actually made an informal approach to HBOS 18 months earlier but accepted a deal would never get through the competition authorities.
This time he not only had the green light but the promise of billions of pounds of taxpayers' money to smooth the deal through.
But he had failed to do what every sound banker knows from birth - his sums.
Mr Daniels admitted to the Treasury select committee last week that Lloyds did only between a fifth and third of the due diligence on HBOS that it normally would have.
He also failed to see just how rapidly the whole banking environment was deteriorating. It was bad for everyone in the industry, but it was horrific for HBOS.
That was highlighted by the fact that losses on bad lending to companies at HBOS during 2008, which were estimated at £3.3 billion just two months, ago had last week more than doubled to £7 billion.
It was no secret in the City that the former Bank of Scotland part of HBOS, under the "banker to the stars" Peter Cummings, built up an enormous portfolio of corporate loans.
HBOS corporate clients ranged from Sir Philip Green's BHS to Gala Bingo and included swathes of commercial property.
HBOS behaved less like a bank and more like a private equity house on many of these deals. That meant the rewards were great in the good times, but the risks were much higher and the resulting losses huge.
Sir Victor Blank and Mr Daniels are fighting for their corporate survival. Only last week Mr Daniels insisted his takeover of HBOS "will be a very good purchase" in time.
Few people in the City believe that, and actually think the deal has led to the destruction of not one but two banks.
Reader views (6)
The bank didn't fail to do its sums when it illegally sold me a loan protection plan (which, with compound interest, added up to 1/5th of the loan) when it had been fully informed I only temped rather than had a full time job and would not, therefore, be entitled to receive any payment from said plan . . .
Are there any banks which are not, in fact, high-falluting Loan Sharks? Are they really as incompetent as they seem, or just endemically corrupt?
- Roz, Chamonix, France, 16/02/2009 13:32
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Seems the only thing that will possibly get through to our Government and our Financiers is an asteroid hitting the earth. With their fat cat salaries, pensions, expense claims and perks they treat ordinary people as a nasty smell under their noses: useful only for the votes and money to keep them in cream.
- Janet, London, UK, 16/02/2009 12:34
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The directors should be sued for dereliction of their duties for every penny they have got and should resign with immediate effect.
Not only do they give away 43% of the company they turn a profitable well run bank into a basket case----what a farce and shambles----if they could not carry out proper due diligence they the directors are NOT FIT FOR PURPOSE.
- Stephen Cole, LONDON UK, 16/02/2009 12:09
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So Lloyds only did a bout 25% of the "normal" Due Diligence" process . . . Excuse me for asking but why aren't all the firms of accountants that were engaged in relation to these takeovers & mergers being held to account? Or isn't that "part" of the process required when the government permits the side-stepping of the Competition Commission rules & regulations?
After all, aren't the fat-cat firms of accountants and the government both "contributary negligent" and therefore, by definition, also "vicariously liable"?
- Fraser, Telford Park, 16/02/2009 11:33
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The hands of Gordon Brown are all over this and he is culpabale.
- Guy Frazer, London, 16/02/2009 10:41
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The words "We told you so" seem to spring to mind.
- Marc, Harrow, UK, 16/02/2009 10:10
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