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Lloyds/HBOS merger divides opinion

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18/09/2008

Lloyds’ agreed £12bn rescue plan for HBOS has attracted praise and criticism in equal share. After three days of turmoil in the financial markets threatened HBOS’ viability, the speedy takeover was welcomed by some as a necessary way of forestalling a run on the bank, and restoring some confidence in UK financial institutions.
Graham Spooner, investment adviser at The Share Centre said:
 “The merger between Lloyds TSB and HBOS should help bring some much needed stability to the financial sector, and will no doubt alleviate fears of a collapse for HBOS shareholders. We also expect the deal to improve confidence among customers and investors in the UK financial sector.”
HBOS shares rose 54% to 227p on the back of the takeover announcement. Lloyds shares fell initially but recovered and rose 18% to 300p.
However, some investors expressed concern. Richard Buxton, head of equities at Schroders, which owns a 2% stake in HBOS, said:
“Why does this need to happen? The Bank of England’s special Liquidity Scheme buys HBOS time. How does the deal benefit shareholders in HBOS and what if the short sellers turn onto Lloyds and then other banks?”

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