Lloyds steps up Abbey interest

The battle for the hand of the Abbey National stepped up on Friday when Lloyds TSB restated its interest in the bank.

This merger cannot be good for customers, and it is certainly bad news for staff who will pay for the merger with their jobs

Ed Sweeney, general secretary, Unifi

Lloyds, the UK's third largest bank, has applied to trade watchdogs for permission to merge with the Abbey, a statement from the Office of Fair Trading revealed.

Abbey last month rebuffed two 'friendly' bid approaches from Lloyds, preferring instead to pursue longstanding plans to merge with Bank of Scotland.

City observers now believe Lloyds, which has so far offered up to £18bn for Abbey, is close to launching a hostile takeover bid.

Trade authorities could decide whether to allow the Lloyds/Abbey merger as early as 2 February, Friday's OFT notice revealed.

The office has set a deadline of 19 January for comments on the proposal.

Union anger

Opinions are divided as to whether the merger is likely to gain approval.

A merged Lloyds/Abbey would boast a 22% share of the UK mortgage market and 27% of all UK current accounts.

The merger would also lead to the loss of an estimated 8,000 jobs in a drive by Lloyds to eliminate areas where its operations overlap with those of Abbey.

Finance union Unifi called on the OFT to refer the merger for more detailed examination by trade authorities.

"This merger cannot be good for customers, and it is certainly bad news for staff who will pay for the merger with their jobs," Unifi general secretary Ed Sweeney said.

The threat of job losses ahead of a UK general election, expected in May, is believed by some observers to have been a factor in the government's decision on Wednesday to reject Interbrew's takeover of Bass Brewers.

Decision date

The merger of Abbey and Bank of Scotland, which have less overlap, would pose less of a threat to jobs, City analysts believe.

Abbey three weeks ago asked watchdogs to evaluate the BoS merger plans.

The OFT is set on 19 January to give its verdict on the proposal.

Shares in Abbey National stood 41p higher at 1274p in late afternoon trading in London.

Lloyds shares eased 2p to 751p.

Bank of Scotland stock ended 15p up at 730p.