HBOS: Labour ties Lloyds in knots
It will be an enormous shock if the takeover of Halifax Bank of Scotland by Lloyds TSB is not approved at today's extraordinary general meeting of HBOS in Birmingham.
This was a deal personally brokered by none other than the man who 'saved the world', Gordon Brown, and railroaded through competition rules by Lord Mandelson.
As a result the British public faces the prospect of the 'big bank' being in charge of 30pc of the nation's mortgages and a tad more of the country's savings.
This may be highly convenient for Mandelson when he sits down with the Chancellor Alistair Darling at his fortnightly session with bank chieftains.
It will be easier to influence a bank with such a big share of the banking market - on mortgages and small business lending - than if it were dealing with several groups all heading in separate directions.
But whereas HBOS savers may have reason to be thankful this deal is being done, the rest of the stakeholders have reason to be fearful.
If this deal is to have any chance of working, the chief executive designate Eric Daniels, will have to take a meat axe to the branch network.
On a recent stroll down Brighton's major shopping street, I counted at least six branches of banks which will be part of the new franchise, including a full service, traditional Lloyds TSB branch, Halifax branches and a Cheltenham & Gloucester outlet.
Early estimates, later denied, were that as many as 40,000 jobs and 600 branches would have to be culled. In the end that may be too modest.
Worse still, the enlarged bank will have the government sitting on its shoulder. All the partly owned government banks are being asked to achieve two irreconcilable goals.
Firstly, they must maintain mortgage lending at 2007 levels and provide support to small business customers-Secondly, they have to mend their ways by deleveraging their balance sheets while shrinking lending to dodgy clients.
So the banks will have to expand, while contracting at the same time. RS Sayers, the author of Modern Banking, the basic textbook of the banking industry, would be astounded at the thought.
As for investors, they will have a long wait to see any returns. Lloyds TSB shareholders will need to reconcile themselves to being without a cash dividend for at least a year, if not longer.
Paying back the preference dividend out of shrinking profits, at a time when the economy has ground to a halt, was never going to be simple.
This is a deal which should never have happened. There may be an immediate arbitrage opportunity in the shares (HBOS is undervalued) - before the deal is executed on January 9 - but buying for the long term would be foolhardy.
The shame is that the efforts to stop the transaction, including the inept intervention of Sir Peter Burt and Sir George Mathewson (the godfathers of Scottish banking), were stamped on so brutally.
Coming clean
David Ross has finally broken his silence over his failure to properly disclose share transactions in four companies where he was a director. But his statement hardly represents an exercise of transparency.
Instead he notes that he offered his resignation from four companies where he was a director: Carphone Warehouse, where he was joint founder; National Express where he was chairman; Big Yellow where he was chairman; and the family firm Cosalt. The first three have been accepted.
Now he has departed the boards in question he says he will be exclusively engaged on managing his 'private business interests in an orderly manner'. This sounds very laudable but as the second largest shareholder in Carphone, and a big shareholder in the other publicly traded firms, it is hypocritical to hide behind the word 'private'.
The fate of the shareholdings in the public enterprises, in the most turbulent market conditions in half a century, represents serious uncertainty for the boards and the rest of the shareholders.
Ross provides no explanation of his 'unintentional' technical breach of disclosure rules, and neither does he seek to explain why the shares in the public enterprises were pledged, to whom they have been pledged and where they may end up should the rest of his business empire go badly wrong. It is claimed that his assets still exceed his liabilities.
But in the current market where property values and share values are plummeting there is no way of testing that thesis.
A person who enjoyed the celebrity limelight does neither himself nor the companies he helped to build so successfully any favours by hiding his light under a bushel.
Ross needs better advisers who know the value of transparency.
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