Newspaper article The Evening Standard (London, England)

Hbos Rescue at Risk: Shares Plunge

Newspaper article The Evening Standard (London, England)

Hbos Rescue at Risk: Shares Plunge

Article excerpt


THE ?12.2 billion rescue takeover of HBOS was thrown into doubt today as its shares slumped again.

Traders were betting millions of pounds that the Lloyds TSB deal to save Britain's biggest mortgage lender, owner of the Halifax, was at risk of falling apart.

HBOS shares were down 15.3p at 126.7p by mid-afternoon. A failure to secure the deal would be a massive blow to the authority of the Prime Minister, who was closely involved in stitching it together last week. It would also mark a new and even more dangerous phase of the financial crisis as HBOS is one of Britain's biggest banks with assets of ?667 billion, dwarfing Bradford & Bingley.

The new doubts about the merger deal that would create a huge "superbank" represented in virtually every high street in the country came as share prices around the world were sent on a rollercoaster ride after the failure of the US Congress to approve a $700 billion bail-out for American banks. The FTSE-100 Index initially fell 105 points to 4713 in early trading but then staged a comeback to 4886.7 by midafternoon. Hopes that a new bail-out deal can be negotiated by Thursday when Congress returns after the Jewish new year break breathed some confidence back into the market. But Wall Street and City analysts still fear that without a bail-out more banks will fail because of their burdens of bad mortgage debt, leading to a block on credit that will plunge the world economy into a deep recession. The fresh doubts over the HBOS deal cast a shadow in the City.

The sharp falls in the share price are a clear signal that speculators on the stock market fear the deal is either dead or will be slashed in value. Bank analyst Ian Gordon, of Exane BNP Paribas, said: "Given extreme market volatility, the market is pricin in an increased risk that the Lloyds acquisition either won't go ahead, or that there'll be an attempt to renegotiate in Lloyds's favour. …

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