Government pledges to ensure that UK competition law does not block merger
Lloyds TSB has agreed a £12.2bn rescue deal with HBOS, with government endorsement.
The government, which backed the deal, has pledged to ensure that it is not blocked by competition law, as financial security is of greater national importance at this time.
Cost-cutting and branch closures at both banks will follow the merger, with job losses possibly as high as 40,000. Eric Daniels, chief executive of Lloyds TSB, told the Times that such efficiency measures would save over £1bn a year by 2011.
Daniels will be chief executive of the newly formed organisation, which has yet to be named, with Lloyds TSB chairman Sir Victor Blank as its chairman.
HBOS shares rose after the merger was confirmed, up 23% so far today, while Lloyds shares have slipped nearly 5%.
The deal is key to the UK construction sector as HBOS is a major lender to UK housebuilders, as well as the commercial property industry. Housebuilders will have their eye on the impact on the volume of mortgage lending, and whether Lloyds more conservative attitude to mortgage lending will be brought to bear on Halifax’s 20% share of the market.
Many housebuilders have blamed the current housing downturn on the inability of potential buyers to raise finance for loans, because of restricted lending practices by banks.
In a separate move also aimed at shoring up the country's financial stability, the Bank of England has announced that it will extend its emergency scheme for inter-bank lending into next year.