HBOS considers rival Abbey bid

By KATHERINE GRIFFITHS

HBOS has confirmed it is considering launching a rival bid for Abbey National in a move which could lead to thousands of job losses and branch closures in Britain.

The announcement, which comes one week after Spain's Santander Central Hispano lodged an agreed £8.2 billion ($23.4 billion) offer for Abbey, could spark an all-out bidding war for the UK's number six lender among Britain's biggest banks.

Lloyds TSB, Barclays, Royal Bank of Scotland and HSBC will now be under pressure to assess whether they could also join the battle. Citigroup, the mega US financial institution, which is understood to have made an informal approach to Abbey within the past year, could also be prompted to reconsider.

"HBOS is very much at the preliminary stages and no decisions have been taken. The process has a long way to go, and nothing could come of it," an HBOS spokesperson said.

HBOS, which is expected to decide within the next few weeks, would not comment on what price it might offer for Abbey, but there were suggestions it might bid about £9 billion, or 610p a share. That is a premium to Santander's mainly paper offer, which was valued at 550p a share, or £8.2 billion.

A combination of HBOS and Abbey would bring together 85,000 employees and almost 2000 branches. HBOS would be almost certain to cut chunks out of both of those numbers and it could also abandon Abbey's name in favour if its own well-known brands, Halifax and Bank of Scotland.

Confirmation that HBOS was looking at making a bid for Abbey surprised many, who had thought James Crosby, the chief executive of HBOS, had given guidance that the regulatory hurdles to a major UK bank buying Abbey were too great.

Unveiling half-year results last week, Crosby said that for large banks: "The Competition Commission analysis is pretty copious and highlights there are real difficulties for anybody in that area."

All of the main high street banks would like to swallow Abbey to take advantage of cost savings and revenue synergies. But they have held off after an £18 billion approach in 2001 by Lloyds TSB was blocked by the Competition Commission on the grounds that it would have concentrated too large a share of the personal and business current account market into the hands of one player.

- INDEPENDENT