A merger between HBOS and Lloyds TSB would have far-reaching implications for the British housebuilding industry.

Analysts suggested Lloyds TSB, which has so far weathered the credit crunch without calling on for more cash from investors and has a reputation for caution, was likely to take a different approach to investing than HBOS.

Robin Hardy, an analyst at KBC Peel Hunt, said: “It is likely that Lloyds would take a much more conservative attitude to mortgage lending. The big question will be what the firm’s approach will be to existing investments.”

Analysts are concerned a deal may further limit UK mortgage lending, already blamed for much of the housing industry’s woes. With more than £4bn lent to housebuilders and with significant shareholdings in six major builders, the turmoil at HBOS will cause widespread concern.

Ian Robertson, consultant and former chief executive of Wilson Bowden, said: “If I were still running a housebuilder, I’d be worried what its new attitude to lending would be, and whether combining HBOS and Lloyds would mean they were going to want to reduce their exposure to my firm.”

Another city analyst, who asked not to be named, said: “Every way you look at it, HBOS is up to its neck in housebuilders and housebuilders are up to their neck in HBOS.”

HBOS is vital to the housing sector because it contains the Halifax, Britain’s largest mortgage lender, and the Bank of Scotland, one of the most enthusiastic bankers for housebuilding businesses.

HBOS’ recent history in the sector is as follows:

  • It is thought to have invested £100m to buy a 20% stake in Scottish construction group Miller
  • It part funded a £713m takeover of Crest Nicholson by West Coast Capital
  • It invested £27.5m in a 40% stake in the Scottish firm Tulloch Homes
  • It invested an undisclosed sum in Scottish housebuilder Cala Group
  • It took a 58% stake in retirement home specialist McCarthy and Stone
  • It backed a £783m management buyout of social housebuilder Keepmoat.

HBOS has also lent about £4.2bn to housebuilders. In addition, 37% of its £118bn total corporate lending is to the commercial property sector, which it claims is a slightly lower than average ratio for a British bank.