The Prime Minister is taking a huge gamble on his political survival over the future of HBOS, in whose proposed takeover by Lloyds TSB he personally intervened.
Lloyds is offering the equivalent of 188p for every HBOS share, but yesterday HBOS closed at 122.40p, a fall of 13.8 per cent on the day. It’s hard to see how the deal can go ahead in its present form; Lloyds shareholders will be extraordinarily reluctant to see their company pay 50 per cent over the odds for a company whose stock apparently remains in freefall.
This is very bad news for the Prime Minister on several fronts. The potential collapse of one of the country’s biggest retail banks and arguably its best-known mortgage lender would be bad enough in itself, but the political fallout in Scotland would be devastating for Labour. The demise of such an iconic Sottish institution as HBOS would almost certainly mean defeat in the Glenrothes by-election, which is the next awful hurdle facing the PM. The loss of what ought to be a rock-solid seat might well be enough to trigger a direct challenge for the party leadership.
Mr Brown is reported in today’s Times as “confident the Lloyds TSB takeover of HBOS will go ahead”. That is very brave talk. If the deal doesn’t come off, the Prime Minister’s remaining political credibility may be terminally undermined.
This is all happening at an extremely volatile time in the market.
We have the American connection causing stress to those extremely nervous people on the stock exchange who seem to get the jitters everytime someone makes a comment out of place.
A couple of weeks ago the price agreed for the takeover was higher.
They were bought at £2.75 a few weeks ago.
The shares are up and down like a yo yo. Normal people do not do business until the situation has settled. This is being railroaded through and investors have no say whatever.
I am personally angry that HBOS were allowed to ask shareholders to buy more shares in a capital rights issue a few weeks ago when they were apparently badly placed in the risk market.
If I knew that my car had a bad defect and sold it to someone nevertheless, I would be a cheat. That is what HBOS were doing with their rights issue.
“Let the buyer beware” is a favourite comment in such situations but you said it yourself in your blog that HBOS have been iconic. We were not told that they were badly placed in the risk market, just that they had to raise capital.
Who can you trust? Bankers? Government? The poor nervous people on the floor of the stock exchange?
There is a new phrase coming “Let the saver beware” because the saver though the person that everyone “values” as a provider of cash for the banks, stands to lose the most.
So much so that the P.M. is now promising to seek to insure up to £50,000 of savings.
I say seeks to do so, as it has to be made law with all the uncertainty of that process.
The banking sector including the mortgage industry have failed every investor through their untrustworthy and risky behaviour.
Britain will not forget.
DC