LLOYDS' acquisition of HBOS is proving to be its own version of the Royal's cack-handed takeover of ABN Amro. Both deals lumbered the acquisitor with a mountain of putrifying waste that has been passed on to you and me, the taxpayers.
The details of Lloyds' deal to join the Government's asset protection scheme reveal that 83% of the bad assets are from HBOS, largely a result of the over-ambitious lending in its corporate banking arm and the risks it took on the home front.
The
end result is that the two banks are now 77% owned by the state, begging the inevitable question as to why the Government didn't nationalise HBOS in the first place. Those who campaigned for its continued independence would at least have the prospect, however idealistic, of one day seeing it returned to the private sector.
Or so they thought. Hindsight is a wonderful thing, and when the Government pushed HBOS into the arms of a grateful Lloyds TSB last summer no-one knew just how bad the crisis was going to get and how much rubbish had been left uncollected in the vaults. With the Government already owning Northern Rock and picking up bits of other banks, the opportunity to let Lloyds consummate a marriage it had coveted for at least two years looked too good to pass up. The Lloyds board couldn't get their hands on HBOS quick enough and were clearly delighted to have satisfied the Government's preference for a private sector solution.
But neither the Treasury's statisticians, nor those who looked over the books for Lloyds, dug deep enough into HBOS's cesspit. Sir Victor Blank and Eric Daniels, the chairman and chief executive respectively at Lloyds, have been left with dollops of egg on their faces. The whole episode smacks of a leadership in awe at the prize awaiting them without noticing that it was badly tarnished.
There was always a risk, well ahead of the vote on the deal, that it would be Lloyds' shareholders who would suffer most from this deal. So it has proved. HBOS was bust, but it was too big to be allowed to fail. The Government and Lloyds could argue that at least they've tried to make the only viable solution work. What's done is done and, like RBS, we have to hope that we are nearing the bottom and will see a restoration of at least some of that lost value.
Wily Crombie may yet outfox shaky markets IT looks as if Sir Sandy Crombie will escape the wrath of the market this week amid reports that Standard Life would be among a clutch of insurance companies seeking new capital. While the squeeze is on, those fearing a rights issue should rest easy.
The City has been fizzing with talk that insurers would be following the banks into a massive cash call on shareholders after Aviva spooked the market on Thursday. Its decision to maintain its dividend chilled investors worried that its capital position was under pressure.
A £1.3bn loss after reductions on investment returns and other exceptionals helped the shares in Britain's biggest insurer, still best known for Norwich Union, lose one-third of their value. They hit an all-time low in the process, and helped drag down every other insurer, including Legal & General, which was already being fingered as a prime candidate for a cash raising exercise.
Crombie was forced to watch Standard Life's shares follow its peers over the cliff. On Friday, they slumped at one point to 128p, another all-time low, before closing at 133.3p, representing a 28% fall on the week and half their value of just three months ago.
While Crombie is expected to reveal a fall in sales this week, in line with the sector, sources say he'll be in no hurry to tap shareholders for cash and will probably lift the dividend.
There is nothing that the wily old fox likes more than disappointing excitable analysts and journalists. To see the company described as "reassuringly dull" is regarded as a compliment and he's expected to do his best at reaffirming that position this week, along with swatting aside continual questions about his personal plans.
Answers are likely to be demanded over the continued vacancy for a UK life and pensions boss. Since Trevor Matthews quit a year ago to join Friends Provident, Crombie has doubled up the job with his own. While the company insists that it has found no-one capable of stepping up to the plate, it does make you wonder why Matthews was paid so much and given so much credit if his job could remain vacant for all that time.
