Lloyds group's Daniels denies he was tricked into buying HBOS

18 January 2010 | By Natalie Thomas, Natalie Thomas

Eric Daniels: A difficult question

Eric Daniels, group chief executive of Lloyds Banking Group, has denied he was hoodwinked into buying HBOS by the government.

Speaking at a Treasury Select Committee meeting last week Jim Cousins MP, a member of the com-mittee, revealed that the government was considering nationalising HBOS while takeover talks were proceeding between the bank and Lloyds TSB.

Cousins revealed that a report by the National Audit Office shows that on September 16 2008 the Treasury considered informing HBOS that the bank would have to close to new business until a rescue package could be arranged.

He then asked why Daniels made shareholders offer to pay £2.32 per share for a busi-ness that was eff-ectively bust.

At the meeting Cousins asked Daniels whether on September 16 “the government hoodwinked you or did you hoodwink your shareholders?”

Daniels replied that he found this a difficult question to answer as he does not believe that anyone was hoodwinked.

Stephen Hester, chief executive of the Royal Bank of Scotland and Gary Hoffman, chief executive of Northern Rock, were also grilled at the meeting.

Hoffman told MPs that his firm’s Together mortgage deals which offered borrowers up to 125% LTV were behind the high level of arrears and repossessions on the nationalised bank’s mortgage book.

He revealed that as of the end of September last year three-month arrears at Northern Rock Asset Management, the so-called bad bank that holds some 400,000 mortgages, stood at 4.11%.

But he adds: “It’s not a bad bank. We are happy for people to keep their mortgages with Northern Rock. We may not be the cheapest but we are not the most expensive either.”