Lloyds TSB is no St Bernard

Lloyds TSB, which is sponsoring the London Olympics to the tune of £80m, is set to take over HBOS, the UK’s largest mortgage lender for £12.2bn and the move has been spun by all those involved as a rescue.

Well, I can understand the meaning of the word rescue in the context of Northern Rock where billions of taxpayers’ money was spent saving the brand, saving jobs and perhaps even salvaging the reputation of the Financial Services Authority and the government, though I am not entirely convinced by that last point.

But with HBOS, although no hard figures are available, it looks as if over 1,000 branches are for the chop although estimates of 40,000 job losses have been described as widely off the mark. Obviously 25,000 to 30,000 would be much more reasonable. The bonus here is that there is an understanding that there won’t be any job cuts in the Prime Minister’s native Scotland.

Then there’s the issue of the brands that might disappear. The rescue might save jobs in Scotland but not Scotland’s very own bank, and on a personal note I will be sad if Halifax should disappear. Back in 1953 it gave my mum and dad, who might now be termed economic refugees, a mortgage and I and my son bought our first homes with the help of a Halifax loan.

The brand is as much a part of our culture as M&S and Branston Pickle and the Prime Minister is unlikely to get any Brownie points for smoothing its demise by assuring the chairman of Lloyds TSB, Sir Victor Blank, that the Competitions Commission will turn a blind eye to the deal.

Part of the problem is that the acquisition of HBOS, rather than a rescue, looks like a bargain. Just compare the £12.2bn Lloyds TSB’s is paying for HBOS with the £19bn it bid for the UK’s second largest lender Abbey National in 1991. Back then, surprise, surprise, the move was blocked by the Competitions Commission.

Timing, as they say is everything.

I am not of course suggesting that there’s a deliberate conspiracy at work but a conspiracy of circumstances which were compounded by the tripartite authorities’ failure over time, and during the recent turmoil, to get on top of the situation.

Let’s face it, the FSA announced a ban on short selling after the HBOS deal was done (short sellers had been deemed to be the demons that caused the landslide in HBOS shares on Monday September 15) but come the following weekend FSA boss Hector Sants was admitting that market panic, not short selling, had been the problem – apparently under 3% of HBOS shares had been “on loan” that fateful Monday.

The FSA really understands what’s going on, doesn’t it?

And as for the long term, if the nationalisation of the Rock was criticised for creating an unfair playing field what will the creation of a bank with a 34% share of all outstanding mortgages and a monopoly of personal savings do?

Adrian Coles, director general of the BSA does not agree with my rhetoric and told me that when faced with a meltdown of the market, he says: “clearly it was important to put financial stability first.”

Looking ahead, however, he was concerned that “a new Lloyds’ could use its position to underprice the market to gain market share.”

That I think is a very real risk.