Lloyds/HBOS: the shotgun wedding years in the making
Surely it was high time Lloyds TSB made a life-changing acquisition? Surely it had the balance sheet to do so? And surely assets were available at a never-to-be-repeated price? Philip Moore put these questions to Lloyds’ finance director less than a month before its shotgun wedding with HBOS. It’s clear that making a transformational deal for the UK bank was only a matter of time.
Eric Daniels, Lloyds TSB’s much-travelled chief executive, has told at least two newspapers and one shareholders’ meeting that you don’t buy a new pair of shoes just because it is cheap. But when you’ve been coveting that pair of shoes for months, and when its price has been slashed by 80% or so, you need to be parsimonious in the extreme to walk on by.
It is difficult to overstate how much the stars seemed to be smiling on Lloyds TSB when it – and the short-sellers – pushed HBOS’s shares into bargain-basement territory. Long regarded as fabulously dull, by the middle of the summer Lloyds TSB was also looking like the bank that had dithered while others had acted decisively to snap up assets in the industry’s sale of the century.
Of course Lloyds had benefited from its boring approach: it had avoided many of the expensive pitfalls that its rivals had fallen into. Back in the 1990s, under Brian Pitman, it was the poster-boy of retail and commercial banking, maintaining a triple-A rating and throwing off profits and capital that critics said it could not properly deploy.