Money mergers

The planned merger between Lloyds TSB and HBOS now appears to be in the process of being renegotiated whilst a merger between two large mutuals namely the Britannia Building Society and Co-operative Financial Services appears to be on.

It appears that Lloyds TSB are looking to change the terms of the merger given the large fall in the share price of HBOS compared to when the deal was initially agreed.

The collapse of the Lloyds TSB and HBOS deal would not be unexpected given that when the deal was first agreed HBOS was facing problems in trying to persuade other banks to lend it money and the UK government were happy for Lloyds TSB to come to its rescue even though there were likely to be competition issues.

The news last week that the UK government were effectively going to guarantee any loans made to the major banks means that there is no longer the requirement for HBOS to enter the deal as any banks who lend it money should be confident that their money is safe.

If the deal did collapse it will be seen as good news for the UK consumer as there will be more competition in the banking sector and it will be good news for the staff of HBOS many of whom would surely have lost their jobs as part of the merger.

Moving on to the news that the Britannia and the Co-op could merge would create a mutual with over 6 million customers. Both the Britannia and the Co-op are in strong financial positions but the merger would allow them to compete with other financial institutions better.It is unclear at this stage if the mutual merger went ahead if there would be any windfall payments for members.