UK government to hold 43.4 pct of Lloyds-HBOS
LONDON (AP) – The government will own almost half the new bank created by Lloyds TSB’s rescue takeover of HBOS PLC after investors largely shunned a 13 billion pound share issue, the two banks confirmed Monday.
Only 0.24 percent of the HBOS shares on offer, and 0.5 percent of Lloyds shares, were taken up by existing stockholders. That left the government to pick up the rest under its promise to underwrite the capital raising as part of its multibillion bailout package of the banking sector.
As a result, the British state will have a 43.4 percent stake in the new bank.
The government waived competition rules to allow the deal, which will create a banking giant with some 3,000 branches and 145,000 employees across Britain.
The merged bank, to be named Lloyds Banking Group, will control about 25 percent of British customers’ personal bank accounts and about 28 percent of the mortgage market.
The deal is expected to gain legal approval in Edinburgh later on Monday.
Both banks have found it tough to raise capital given continuing uncertainty in world financial markets.
HBOS offered 7.5 billion new shares to raise 8.5 billion pounds, while Lloyds TSB offered 2.6 billion new shares to raise 4.5 billion pounds in the rights issue.
Based on Friday’s closing prices, the taxpayer is sitting on combined losses of around 3.5 billion pounds on its stakes in both companies.
“We are pleased that the capital-raising process has completed and that the new, combined group will have a strong financial position,” said Lloyds TSB Chief Executive Eric Daniels. “We understand that many existing shareholders did not participate because of the divergence between the offer price and the current market price.”
The government has also invested a further 4 billion pounds in the two banks in return for preference shares. These come with conditions, such as a ban on executive bonuses, as long as they are still held by the Treasury.
Alongside its stake in the merged Lloyds-HBOS, the government is also a majority shareholder in Royal Bank of Scotland PLC – owning almost 60 percent of the bank – as part of its industry bailout.
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