|low graphics version | feedback | help|
|You are in: Business|
Tuesday, 10 July, 2001, 16:24 GMT 17:24 UK
Lloyds TSB/Abbey tie-up blocked
Lloyds TSB's £18bn takeover bid for Abbey National has been blocked.
Patricia Hewitt, trade and industry secretary, said she had followed the unanimous decision of trade watchdogs, and decided that the merger would be against the public interest.
The ruling, which had been widely expected, will come as a setback for Lloyds TSB, which responded by reaffirming its takeover ambitions.
"We will continue to focus on delivering value for shareholders through organic growth and acquisitions," the bank said.
But the decision will be welcomed by union leaders, who feared the deal would have cost significantly more jobs than the 9,000 forecast by Lloyds, and Abbey directors, who rejected two takeover approaches as "inadequate and uncertain".
Abbey on Tuesday said it would "pursue its aggressive growth strategy".
Ms Hewitt's ruling follows a four month inquiry by the Competition Commission into Lloyds' takeover proposals, which were unveiled in December.
It would also hit efforts to boost competition among providers of small business banking services, "with the adverse affects in both markets of higher prices to customers and reduced innovation", Ms Hewitt said.
Although the commission accepted that the merger would lead to efficiency savings, which Lloyds estimated at £1bn a year, it "did not consider that these would be passed on to consumers in reduced prices".
Commission officials said they had considered ideas such the disposal of Lloyds' Cheltenham & Gloucester division, or Abbey's Cahoot, to ease fears of market dominance.
But they concluded that such steps "raised practical problems".
"Prohibiting the merger was the only remedy capable of fully addressing the adverse effects," the DTI said.
The commission rated Abbey as one of the few banks able to compete against the UK's big four High Street banks - Barclays, Lloyds, Royal Bank of Scotland/NatWest and HSBC - whose grip on some financial services markets has raised widespread concerns.
And on Monday, DeAnne Julius, a former member of the Bank of England's monetary policy committee, issued a report recommending measures to encourage competition and choice for bank customers.
Ms Hewitt's decision opens the way for Abbey to become the fifth force in UK banking, analysts said, although it may be overtaken by a merged Bank of Scotland/Halifax group, should the banks' ongoing tie-up efforts succeed.
"[Abbey] has been growing in the market for small businesses, exploring international markets - this decision could allow time for Abbey to fulfil this potential," Mr Centis told BBC News Online.
Nonetheless, Abbey may yet lose its independence, with National Australia Bank (NAB), Australia's biggest bank, said to be interested in entering a bid.
NAB, which already owns Yorkshire and Clydesdale banks in the UK, sold National Michigan Bank for a profit of 1.6bn Australian dollars in March.
"Merger with the NAB could have significant advantages for Abbey, helping it further its aims to develop from the mortgage-based business of old into an international concern," Mr Centis said.
NAB, Australia's largest bank, has declined to comment on the rumours.
Lloyds reaffirmed after the ruling its opinion that a merger with Abbey would not have "adversely impacted" competition in UK banking.
And chief executive Peter Ellwood confirmed the views of City analysts, who believe the bank will now look abroad for a takeover target.
"What we have been doing and continue to do is to look overseas," Mr Ellwood said.
"We have been looking in Europe and also in North America and I think the climate is beginning to be more favourable,"
An analyst told BBC News Online: "The bank has a few options in the UK - perhaps Alliance & Leicester or Northern Rock.
"But the UK bank merger wave is effectively over for the time being."
In the City, news of Ms Hewitt's decision prompted a revival in the price of bank shares, which have been hit in recent days following profits warnings by foreign rivals, although prices fell back in later trade.
Shares in Abbey National closed down 7p at 1,173p on Tuesday, while Lloyds TSB ended up 1p at 670p.
Abbey shares hit 1213p shortly after Ms Hewitt's announcement, with Lloyds stock reaching 696p.
Shares in Northern Rock, which some analysts view as a potential takeover target for Lloyds, were the sector's top performers, rising 5.5% to 607p, their highest closing price since April 1999.
10 Jul 01 | Business
Q&A: The Lloyds/Abbey merger decision
10 Jul 01 | Business
Patricia Hewitt statement in full
10 Jul 01 | Business
Minister 'to block Lloyds/Abbey deal'
09 Jul 01 | Business
Banks 'must speed transfers'
02 May 01 | Business
Fifth force might help Lloyds deal
30 Mar 01 | Business
Watchdog hears merger protests
06 Mar 01 | Business
Big banks 'operate monopoly'
The BBC is not responsible for the content of external internet sites
Top Business stories now:
Links to more Business stories are at the foot of the page.
Links to more Business stories
|^^ Back to top
News Front Page | World | UK | UK Politics | Business | Sci/Tech | Health | Education | Entertainment | Talking Point | In Depth | AudioVideo
To BBC Sport>> | To BBC Weather>>
© MMIII | News Sources | Privacy