Couple of interesting notes on Lloyds TSB's merger with HBOS, which gained legal clearance from the courts yesterday when the last protests by the Merger Action Group (MAG) were rejected.
In City A.M., there was a one page interview with Sir Victor Blank, Chairman of Lloyds TSB and soon to be Chairman of the "Lloyds Banking Group", as they will be known.
Sir Victor is a fan of Man United apparently, so he'll be a happy man today as his team scraped a draw with Aalborg to win their Champions League Group last night.
Sir Victor is also winning with 1 in 3 Brits likely to hold an account or mortgage with the new megabank. He claims the new Group "will be the biggest in a number of segments, but absolutely not dominant ... this is a highly competitive financial services marketplace and that will continue to be the case." We shall see.
Meanwhile, shareholders get to vote on the transaction tomorrow, and with the Government pressing hard for a positive result, as are the Lloyds TSB guys, it looks like a no-brainer.
Speaking of the Government, who now have a major stake in this Group as they do with RBS, Sir Victor says "have we got to the end of the interplay between governments and banks? It depends on your view of how deep the recession will be."
He expands on this theme: "the regulators should work more closely with financial institutions to understand and monitor their strengths and their risks. They have admitted there were failings in what they did in the past and it would be nice to think that they make sure it won't happen again."
Too darned right Mr. Chairman. Mind you, it's been a nice little takeover on a platter for the Lloyds TSB executive team, so we can't be too chagrined about this can we?
Meantime, there's the news that the Group will keep the brands in tact by leaving Bank of Scotland in Scotland to please the Scots and the Halifax for the rest of the UK.
Sir Victor makes the point that "there's a lot understandable emotion, in Scotland in particular, about jobs and the financial services industry. I understand how they feel, but I don't think it will be a major factor in the outcome of the bid."
Och aye, Victor. In fact, he says that "the prospects for jobs and economic activity in Scotland are greater with the merged group than with an independent HBOS."
Too true, as Lloyds' main stake in Scotland is Scottish Widows. There are 187 Lloyds TSB branches there as well, but expect those to be the target for closure or realignment.
Expect the opposite action for the rest of the Group though, especially the Halifax.
It does not make sense to have both branches of Halifax and Lloyds TSB offering deposit accounts and full transaction services next door to each other on the High Street. There's far too much overlap.
Bearing in mind that the Halifax was a mortgage bank and former building society, the Halifax is far more likely to be re-orientated as a brand towards pure mortgage services. That will mean that Lloyds TSB's existing mortgage operation, Cheltenham & Gloucester (C&G), will be rolled into the Halifax, with the general view that C&G then becomes a pure broker for mortgages, savings and investments.
That will mean relocating most back office staff from the Cotswolds (C&G) to the Yorkshire Moors (Halifax), which may not be to the liking of everyone.
Should be a few savings from the synergies there alone though, as well as a lot more from closing down branches that duplicate services on the same high streets of Britain.
A lot of work in 2009 for Mr. Daniels, the CEO, and Sir Victor therefore.
Oh what fun.
In the Times this morning:
"HBOS, Britain's biggest mortgage lender, today revealed the £8 billion cost of bad debts and charges for mortgage, loan and business arrears as its shareholders prepare to vote on the bank's rescue takeover by Lloyds TSB.
"In a trading statement released this morning, HBOS, which owns Halifax and Bank of Scotland, said its impairment charges for mortgage borrowers falling into arrears had risen more than threefold since June to £700 million this year as increasing number of homeowners struggled to meet their repayments.
"The impairment charge for unsecured lending in the 11 months to November was a larger £1 billion, while the impairment charge in corporate has nearly doubled since September to £3.3 billion.
"The total amount the bank is setting aside for bad loans and charges is now £8 billion, up from £4.2 billion at the end of September ..."
More here:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5328795.ece#cid=OTC-RSS&attr=1185799
Posted by: Chris Skinner | December 12, 2008 at 08:46 AM