HBOS

Infobox Company
name = HBOS PLC

type = Public (LSE|HBOS)
genre =
foundation = 2001
founder =
location_city = Edinburgh
location_country = Scotland, UK
location =
locations =
area_served =
key_people = The Lord Stevenson of Coddenham CBE, Chairman Andy Hornby, CEO
industry = Finance and Insurance
products = Financial Services
services =
market c

revenue = £21,291 million (2007)
operating_income = £5,149 million (2007)
net_income = £4,109 million (2007)
assets =
equity =
owner =
num_employees = 72,000
parent =
divisions =
subsid =
homepage = [http://www.hbosplc.com/ www.hbosplc.com]
footnotes =
intl = yes

HBOS plc (LSE|HBOS) is a banking and insurance group in the United Kingdom, the holding company for Bank of Scotland plc, which operates the Bank of Scotland and the Halifax bank; HBOS Australia, owner of BankWest; and HBOS Insurance & Investment Group Limited, the group's insurance division. Although officially HBOS is not an abbreviation with any intrinsic meaning, it is widely recognised as an initialism for Halifax Bank of Scotland. The corporate headquarters of the group are in Edinburgh, Scotland; the old head office of the Bank of Scotland. Operational headquarters are based in Halifax, West Yorkshire, England; the old head office of Halifax. [cite web|url=http://www.allbusiness.com/public-administration/national-security-international/1038824-1.html|title=Bank of Scotland, Halifax tie knot|publisher=All Business|accessdate=2007-07-02]

HBOS was formed by the merger of Halifax plc and the Governor and Company of the Bank of Scotland,cite web |url=http://www.guardian.co.uk/money/2001/may/04/personalfinancenews2 |title=HBOS: the issue explained |publisher=Guardian |date=2001-05-04 |accessdate=2008-09-17] and the formation of HBOS was heralded as creating a fifth force in British banking as it created a company of comparable size and stature to the established "Big Four" UK retail banks. It is also the UK’s largest mortgage lender. [cite web |url=http://www.iht.com/articles/2008/08/07/business/pound.php |title=HBOS is the largest mortgage lender in the Isles |date=2008-08-07 |accessdate=2008-09-17] HBOS is a public limited company listed on the London Stock Exchange. A reorganisation of the group initiated by the HBOS Group Reorganisation Act 2006 saw the transfer of Halifax plc to the Governor and Company of the Bank of Scotland, which was now a registered public limited company, Bank of Scotland plc.

On 18 September 2008, Lloyds TSB plc officially announced a confirmed agreement to take over HBOS plc in a deal worth £12.2 billion (US$21.85-billion). Lloyds stated that it would continue to use 'The Mound' as the headquarters for its Scottish operations and would continue the issue of Scottish bank notes. [cite web |url=http://www.iht.com/articles/ap/2008/09/18/business/EU-Britain-HBOS.php |title=Lloyds TSB confirms deal to take over HBOS |date=2008-09-18 |accessdate=2008-09-18] cite web |url=http://www.investorrelations.lloydstsb.com/media/pdf_irmc/ir/2008/2008Aug_LTSB_Acquires_HBOS.pdf|title=Recommended acquisition of HBOS plc by Lloyds TSB Group plc|publisher=Lloyds TSB|date=2008-09-17 |accessdate=2008-09-18]

On 8 October 2008, HBOS's Australian arm BankWest, and wealth management firm St Andrews, was acquired by the Commonwealth Bank of Australia for $2.1 Billion dollars (AU). The sale was just 0.8 times BankWests book value.

History

Formation

The Bank of Scotland is the UK's oldest commercial bank, by an Act of the Parliament of Scotland in 1695. Halifax was founded in 1853 as the Halifax Permanent Benefit Building and Investment Society, which demutualised in 1997 to become a public limited company (plc). [cite web |url=http://findarticles.com/p/articles/mi_qn4158/is_19970305/ai_n14091791 |title=Halifax could have another £3bn to hand out |date=1997-03-06 |accessdate=2008-09-17]

The merger of the Bank of Scotland and Halifax occurred in 2001 during a wave of consolidation in the UK banking market which began in the late 1990s. The Bank of Scotland played a key role in the process, firstly by launching a hostile takeover bid for NatWest, although the bid failed to a rival offer from the Royal Bank of Scotland. It later investigated a merger with Abbey National, when Halifax approached with an offer to merge.

The merger created the fifth largest bank in the UK by market capitalisation.

HBOS Group Reorganisation Act 2006

In 2006, HBOS secured the passing of the HBOS Group Reorganisation Act 2006, a private Act of Parliament that would allow the group to operate in a more simplified structure. [cite web |url=http://www.opsi.gov.uk/acts/localact2006/ukla_20060001_en_1 |title=HBOS Group Reorganisation Act 2006 |year=2006 |accessdate=2008-09-17] The Act allowed HBOS to make the Governor and Company of the Bank of Scotland a public limited company, Bank of Scotland plc, which became the principal banking subsidiary of HBOS. Halifax plc transferred its undertakings to Bank of Scotland plc, and although the brand name was retained, Halifax then began to operate under the latter company's UK banking licence.

The provisions in the Act were implemented on 17 September 2007.

2008 short selling and credit crunch

In March 2008, HBOS shares fell 17 percent amid false rumours that it had asked the Bank of England for emergency funding. [cite web |url=http://www.guardian.co.uk/business/2008/mar/20/creditcrunch.hbosbusiness|title=Authorities avert run on HBOS caused by false rumours|year=2008|accessdate=2008-09-17] The Financial Services Authority conducted an investigation as to whether short selling had any links with the rumours. It concluded that there was no deliberate attempt to drive the share price down. [cite web |url=http://www.fsa.gov.uk/pages/Library/Communication/PR/2008/086.shtml|title=FSA concludes HBOS rumours investigation|year=2008|accessdate=2008-09-17]

On 17 September 2008, very shortly after the demise of Lehman Brothers, HBOS's share price suffered wild fluctuations between 88p and 220p per share, despite the FSA's assurances as to its liquidity and exposure to the wider credit crunch. [cite web |url=http://www.fsa.gov.uk/pages/Library/Communication/Statements/2008/hbos.shtml|title=HBOS Statement|year=2008|accessdate=2008-10-11]

However, later that day, the BBC reported that HBOS was in advanced takeover talks with Lloyds TSB to create a "superbank" with 38 million customers. This was later confirmed by HBOS. The BBC suggested that shareholders would be offered up to £3.00 per share, causing the share price to rise, but later retracted that comment. [cite web |url=http://news.bbc.co.uk/go/rss/-/1/hi/business/7620483.stm |title=HBOS in merger talks with Lloyds TSB |publisher=BBC News |date=2008-09-17 |accessdate=2008-09-17] [cite web |url=http://uk.reuters.com/article/mergersNews/idUKWLA975220080917 |title=HBOS confirms in takeover talks with Lloyds TSB |date=2008-09-17 |accessdate=2008-09-17] Later that day, the price was set at 0.83 Lloyds shares for each HBOS share, equivalent to 232p per share, [cite web |url=http://uk.reuters.com/article/businessNews/idUKLH43730920080918 |title=Lloyds seals deal for HBOS |publisher=Reuters |date=2008-09-18 |accessdate=2008-09-18] which is less than the 275p price at which HBOS raised funds earlier in 2008. [cite web |url=http://www.guardian.co.uk/business/2008/sep/17/lloydstsbgroup.hbosbusiness |title=Lloyds TSB takeover talks with HBOS: the key issues |publisher=Guardian |date=2008-09-17 |accessdate=2008-09-17]

In order to avoid another Northern Rock-style collapse, the UK government announced that should the takeover go ahead, they would allow it to bypass competition law. This law states that a company cannot hold more than 25% share of the mortgage market.Fact|date=September 2008 Lloyds TSB will now hold a 28% share of the mortgage market.Fact|date=September 2008

Alex Salmond, Scotland's First Minister, previously an economist, said of the takeover:

"I am very angry that we can have a situation where a bank can be forced into a merger by basically a bunch of short-selling spivs and speculators in the financial markets." [cite web |url=http://news.bbc.co.uk/1/hi/scotland/edinburgh_and_east/7621153.stm |title=Salmond attacks financial 'spivs' |publisher=BBC News |date=2008-09-17 |accessdate=2008-09-17]

Vince Cable, Liberal Democrats spokesman labelled the hedge funds which profit from short-selling as "masters of the universe". [cite web |url=http://www.metro.co.uk/money/article.html?Critics_blast_spivs_over_HBOS_bank_merger&in_article_id=314210&in_page_id=36&in_a_source=&expand=true |title=Critics blast 'spivs' over HBOS bank merger |publisher=Metro|date=2008-09-17 |accessdate=2008-09-17]

Takeover by Lloyds TSB

On 18 September 2008 the terms of the recommended offer for HBOS by Lloyds TSB were announced. The deal is expected to be completed by the end of 2008 or early 2009. The two main conditions for the acquisition are:

* Three quarters of HBOS shareholder votes in agreement with the board's actions;
* UK government dispensation with respect to competition law.

Most of the shareholding votes at HBOS are in the hands of institutional investors and it is anticipated that takeover will proceed to a successful conclusion.

Prime Minister Gordon Brown personally brokered the deal with Lloyds TSB, an official said: “It is not the role of a Prime Minister to tell a City institution what to do”. [cite web |url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4772801.ece
title=Gordon Brown steps in to secure HBOS rescue |publisher=The Times Online |date=2008-09-17 |accessdate=2008-09-18] The Lloyds TSB board have stated that troubled banks Merrill Lynch and Morgan Stanley were amongst the advisers recommending the takeover.

Operations

HBOS conducts all its operations through three main businesses:
* Bank of Scotland plc
* HBOS Australia
* HBOS Insurance & Investment Group Limited

Bank of Scotland plc

Bank of Scotland plc is the banking division of the HBOS group, and operates the following brands:

United Kingdom

* Bank of Scotland
* Bank of Scotland Private Banking
* Bank of Scotland Treasury Services
* Birmingham Midshires
* Halifax
* Halifax Financial Services (Holdings) Ltd
* Halifax Investment Fund Managers Ltd
* Halifax Share Dealing Limited
* Halifax Unit Trust Management Ltd
* Intelligent Finance
* Sainsbury's Bank (50%)
* The Mortgage Business (TMB)
* Blair, Oliver & Scott (Debt recovery)
* St James's Place Bank

International

* Banco Halifax Hispania
* Bank of Scotland Corporate
* Bank of Scotland International
* Bank of Scotland Investment Services
* Bank of Scotland (Ireland), trading as Halifax
* Bank of Scotland (Netherlands)

HBOS Australia

HBOS Australia was formed in 2004 to consolidate the group’s holdings in Australia. It consists of the following subsidiaries:

* Capital Finance Australia Limited
* St Andrew's Australia Pty Ltd
* BOS International (Australia) Ltd

On 8 October 2008 HBOS Australia sold its Bank of Western Australia [Reuters UK - Australia's CBA buys HBOS's BankWest for $1.5 bln [http://uk.reuters.com/article/bankingfinancial-SP/idUKSYD5988120081007] ] and St Andrew'sFact|date=October 2008 subsidiaries to Commonwealth Bank of Australia.

HBOS Insurance & Investment Group Limited

HBOS Insurance & Investment Group Limited manages the group’s insurance and investment brands in the UK and Europe. It consists of the following:

* esure
* First Alternative
* St James's Place Capital (60%)
* Halifax General Insurance Services Ltd
* Halifax Insurance Ireland Ltd
* Clerical Medical
* AA
* Sainsbury's
* Sheilas' Wheels

References

Notes

Bibliography

* Alan Cameron, "Bank of Scotland, 1695-1995: A Very Singular Institution", Mainstream Publishing (20 April 1995), ISBN 1851586911
* Peter Pugh, "The Strength to Change: Transforming a Business for the 21st Century", Sponsored Publishing (29 Oct 1998), ISBN 0670880493

External links

* [http://www.hbosplc.com/home/home.asp Official website of HBOS plc]
* [https://www.hbos-efs-vertrieb.de Official website of HBOS EFS]
* [http://www.hbosfs.com Official website of HBOS FS]

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