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Wednesday, 25 April, 2001, 16:03 GMT 17:03 UK
Q&A: The Halifax - BoS merger

A fifth force is being planned in the world of UK banking: The Halifax and Bank of Scotland want to merge. BBC business editor Jeff Randall explains the background to the deal.

Why are the two banks merging?

We have two very different businesses here. Halifax is very strong in the mortgage market and has a strong customer base.

Bank of Scotland is very active in the corporate market and a leading provider of credit cards for other organisations, such as universities, charities and football clubs.

If you fit the two banks together, they could work nicely.

They overlap neither in business terms nor geographically.

Halifax is based primarily in England, while the Bank of Scotland has only a handful of branches south of the border.

Could anything go wrong?

Where will the headquarters be? These companies are extremely important to their home markets. Halifax is iconic in Yorkshire and Bank of Scotland sits astride Edinburgh.

Closing one of these headquarters could be tricky. So too would be losing either name.

Then there is the issue of management egos. Who is going to be the overall boss?

Plenty of big deals have fallen through after senior managers could not agree on the power structure.

What will it mean for customers?

I think this could be good for customers because there is a genuine fit here.

It will be beneficial if they produced a fifth force in British banking currently dominated by the big four - HSBC, Barclays, Lloyds TSB and Royal Bank of Scotland/NatWest.

Bank of Scotland's management is highly regarded and could bring something to Halifax's army of customers.

Because there is so little overlap, it is unlikely that there will be widespread branch closures. Which means there are likely to be fewer job cuts in this deal than in other banking mergers.

And what about shareholders of both banks?

Clearly the City likes this proposed deal: Shares in both banks have risen.

And of course, there is now the prospect that one of them will be the subject of a hostile bid from a competitor trying to bust up this merger.

That would drive up the share price further.

And you must remember that many Halifax customers are shareholders, since it transformed itself from a building society into a bank.

They have already benefited from the share-price rise.

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See also:

25 Apr 01 | Business
Halifax and BoS discuss merger
03 Nov 00 | Business
Bank merger wave
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