Jobs to go as Lloyds TSB agrees £12.2bn HBOS deal

LLOYDS TSB has agreed to a £12.2bn takeover of the UK’s biggest mortgage lender Halifax Bank of Scotland – but confirmed the move would lead to job losses.

The all share deal values HBOS shares at 232p each, almost 90p more than Wednesday’s closing price of 147.1p.

It is not certain where jobs will be slashed but there are realistic fears that Yorkshire could be badly hit as HBOS is the region’s biggest financial services employer with 14,000 staff.

Almost half of these workers are based at Halifax’s head office in Halifax and hundreds more work at a HBOS centre in Leeds.

Lloyds, which confirmed jobs would go as a result of the move, also employs thousands in Yorkshire and given the two institutions’ crossover of work, experts believe up to a third of the combined workforce could lose their jobs – a total of more than 40,000 in all.

In a statement from Lloyds, it said the enlarged group would continue to use HBOS’s headquarters in Edinburgh and that management’s focus was to keep jobs in Scotland. No mention was made of other operations.

A question mark also hangs over the future of HBOS chief executive Andy Hornby this morning as Lloyds TSB chief executive Eric Daniels was named chief executive of the enlarged group.

Sir Victor Blank will be chairman following the takeover.

Despite the deal being branded a takeover, it is in effect a rescue by Lloyds TSB of HBOS, given the slide in HBOS’s shares which had led to concerns about its future.

The enlarged group will hold a third of the UK mortgage market, have 38 million customers and almost 3,000 high street branches. It has been speculated the takeover could lead to up to 1,000 branch closures.

The Financial Services Authority today said the tie-up was a “welcome move”, while the Secretary of State for Business and Enterprise John Hutton said the Government would waive competition rules and push through the deal on the grounds of public interest “to ensure the stability of the UK financial system”.

Chancellor Alistair Darling confirmed the Government had decided to “waive competition requirements” in relation to the takeover and said he wanted to put beyond doubt the Government’s desire to see the merger between the two banks.

He said: “We have made a decision that we will waive the competition requirements in relation to these two banks. That is not going to get revisited.”

Mr Darling said the Government wanted to see a deal.

The Government was also keen not to experience a repeat of the Northern Rock fiasco which saw the first run on a British bank for more than 100 years.

Sir Victor Blank said: “This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group.

“Lloyds TSB/HBOS’s outstanding franchise will enable it to service more of its customers needs with the balance sheet strength to prosper in challenging markets. This is a good deal for customers and shareholders.”

Dennis Stevenson, chairman of HBOS, said: “This is the right transaction for HBOS and its shareholders. Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.

“In addition, the combined group will have excellent brands and a very powerful franchise. We are recommending our shareholders vote for this transaction.”

Richard Lambert, the CBI’s Director-General had a mixed reaction to news of the deal.

Mr Lambert said: “It is sad to see HBOS lose its independence in this way but we needed a good market-driven solution to deal with these speculative attacks on the Bank.

“This looks like the right outcome. Lloyds TSB is a strong, well capitalised institution, and the new entity will be well placed to withstand the current turbulence.

“The Government and the financial authorities also deserve credit for making it possible in a timely way.

“It is also good for the broader economy. The last thing we want is a sharp contraction of bank balance sheets because of the impact it would have on the availability of credit.”

Lloyds, the country’s fourth largest bank, said the enlarged group would lead to cost-savings that would enable the firm to boost its earnings by about £1bn a year by 2011.

The Halifax Building Society and Bank of Scotland merged in 2001 to create the UK’s fifth biggest bank.