The Midlands press is already speculating over the future of BM.
HBOS has a 22% share of the UK mortgage market while Abbey has 11%. But combined they would control one third of the market – something competition watchdogs would likely rule out as consumer choice would be stifled and HBOS would become an unstoppable force.
City analysts say options could include offloading BM via a sale to another company such as Lehman Brothers or dissolving the company from the group and floating it in its own right.
BM has grown rapidly in the three years since it relaunched to both intermediaries and the public and is thought to represent up to 11% or half of HBOS's net lending.
Most of that growth has been through high risk specialist lending in areas such as self-cert and sub-prime. But HBOS insiders claim the group's appetite for such risk has started to diminish.
One says: “HBOS has already signalled a move away from specialist lending, evidenced in part through the temporary closure of TMB and a relaunch of lacklustre products.”
Meanwhile BM itself has been rapidly reducing its exposure to specialist areas such as self-cert and sub-prime with the launch of several mainstream tracker products, a move it says is set to continue.
Lehman Brothers, which already owns specialist lenders SPML and Preferred Mortgages, has already said it wants to grow its share of the market by some 30%.
One source says: “Acquiring a company such as BM would do that overnight as well as opening direct to consumer opportunities through BM's retail network of over 60 branches.”
Lehman's declined to comment while a spokesman for BM says: “This is just rumour and speculation. If you are as successful as we have been this is bound to happen.”