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The BBC's Rory Cellan-Jones
"Shares in both companies rose after news of the merger talks leaked out"
 real 56k

Hayley Millar reports
"The Bank of Scotland has been under pressure to find a partner"
 real 56k

Wednesday, 25 April, 2001, 19:26 GMT 20:26 UK
Halifax and BoS discuss merger
Halifax and Bank of Scotland logos
Halifax and Bank of Scotland are in talks about a 26bn merger.

Halifax, the UK's biggest mortgage lender, says the companies are discussing a "merger of equals".

Profile - Halifax
Founded in 1852
Demutualised in 1997
Stockmarket value: 16.4bn (20 Apr)
Employees: 37,000
Pre-tax profit last year: 1.89bn (+8%)
"Discussions are continuing and a further announcement will be made when appropriate," the former building society said in a statement.

The statement was issued after press reports that the pair had held talks on Tuesday.

The reports suggest the deal might mean the loss of the Bank of Scotland's headquarters on Edinburgh.

But BoS, which employs 4,000 people in Edinburgh, would see its chief executive Peter Burt installed as head of the merged group.

Tie-ups

The news follows a long period of consolidation in the UK finance sector.

Profile - Bank of Scotland
Founded in 1695
Stockmarket value: 9.82bn (20 Apr)
Employees: 20,000
Pre-tax profit Mar - Aug 2000: 535m (+14%)
Last year Royal Bank of Scotland took over NatWest, Barclays snapped up The Woolwich, and Abbey National bought life insurance company Scottish Provident.

Abbey National also held long running and acrimonious merger talks with Bank of Scotland - which were scrapped in February after Lloyds TSB launched a counter-bid for Abbey National.

Bank of Scotland has been seeking a partner for more than a year after failing in an audacious takeover bid for NatWest.

Mergers have been prompted by desires to cut costs through merging operations, or to muscle into the lucrative life assurance and pensions markets.

Job threat

A tie-up between Halifax and BoS would wed the UK's largest mortgage lender to a 400-year-old bank with strengths in traditional business, and particular success in attracting corporate customers.

The changing face of UK banking
2000
Feb: Royal Bank of Scotland buys NatWest
Aug: Barclays takes over The Woolwich
Sep: Abbey National buys Scottish Provident
Nov: Abbey admits merger talks with Bank of Scotland
Dec: Lloyds bid for Abbey revealed

2001

Feb: Abbey ends talks with BoS
The proposal, which some observers believe would create a fifth major force in UK banking, was welcomed by City analysts.

"It's an excellent strategic fit," said Mark Thomas, banking analyst at Fox-Pitt Kelton, who forecast that, by merging, the banks would be able to cut 300m in costs.

While such a cost-saving package would be likely to spell job cuts, redundancies would be unlikely to be on the scale of those forecast in the proposed Lloyds/Abbey deal.

Lloyds predicts that the takeover would, in achieving 950m of savings a year, lead to the loss of 9,000 posts.

The deal is currently being investigated by comeptition watchdogs.

In the City, BoS shares closed 59p higher at 801p. Halifax shares were up 30p at 768p.

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See also:

25 Apr 01 | Business
Q&A: The Halifax - BoS merger
25 Apr 01 | Business
Bank of Scotland: Lucky at last?
12 Dec 00 | Business
Abbey rebuffs new Lloyds TSB bid
31 Jan 01 | Business
Lloyds ups stakes in Abbey bid
14 Feb 01 | Business
The battle for Abbey National
14 Feb 01 | Business
Abbey posts record profits
03 Nov 00 | Business
Bank merger wave
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