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HBOS & Lloyds TSB

Like many people in our industry, I have been glued to the screen watching the HBOS / Lloyds TSB news with avid interest.

I have said before that we are in the midst of historic times, but I am not sure many of us realised just how historic.

Banks that survived the Wall Street Crash of yesteryear have not made it through the credit crunch.

The largest insurance company in the world needed a $75 billion bail out loan from the US government.

Now we have the UK’s biggest mortgage lender HBOS, being forced into a merger with Lloyds TSB – what is the world coming to ?

This will create a massive banking institution worth around £30 billion, with a massive slice of both the mortgage and savings market.

This in itself brings with it several issues, not least competition issues given the sheer size of market share it would generate in those areas.

The Government has, however, worked out a way round these issues which seems to involve “special measures” being put into place in the interests of the wider economic good.

The Prime Minister could not afford to have another Northern Rock on his hands so has himself been directly involved in negotiations, leading one wag in our office to comment sarcastically, “the deal is in safe hands then!”.

Overall, it is a real shame to see this happen, especially from the point of view of consumer choice and undoubted effects on jobs. I do believe HBOS is fundamentally strong, it has good people running it at all levels.

Only in July HBOS raised £4 billion and still made a £950 million profit in the first half of the year.

However current conditions and intense media speculation – HBOS has been hounded unfairly by many for a while – plus reportedly shadowy speculative “short-seller” groups, have led to share-prices rising and falling like a switchback on heat.

It is a sad day that HBOS seems to have been forced into this situation.

We must all hope that it ultimately proves to be the best, if only, real solution.

It will undoubtedly calm things down considerably, and we all need a bit of calmness.

The effect on our industry will no doubt be a profound one, as the landscape again changes dramatically.

Consumers and brokers may end up losing one or more big brands with good lending appetites.

Some excellent staff may be displaced.

The new entity may actually come under pressure to reduce its combined market share leading to more unattractive pricing in the short-term, right when we need more products most.

It may however, be somewhat of a triumph in the long run. Lloyds TSB are after all a well-run company themselves, and a larger, stable lender with some of the best staff in the business is a real benefit.

If they integrate an IT system which is quick and efficient, utilise their strength to offer some real product benefits to consumers, we may even see perhaps an appetite to become even more innovative with product design with certain brands, as it will no longer represent a major part of the lending book.

Whatever happens, HBOS still needs our support, as do it’s excellent staff, and we must not let customers or the media panic, as that is in nobody’s interests.

What is indisputable is that HBOS, whether alone or together with Lloyds TSB are, and will remain, of massive importance to our industry.


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