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29 May 2023

Lloyds sets its sights on competitors

By Staff Writer


Lloyds TSB, Britain’s fourth-largest bank, is likely to bid for its smaller rivals Alliance & Leicester and Bradford & Bingley as it scents opportunities to snap up rivals hit by the credit crunch, a United Kingdom-based newspaper said yesterday.

The British bank, which announced strong full-year profits of £3.9 billion (Dh28bn) on Friday, is in the early stages of assessing the merits of approaches for either of its smaller competitors, Sunday Telegraph said.

People close to Lloyds cautioned late on Saturday that it was “early days” and that the bank’s board had yet to formally discuss an approach for one of its rivals. The board has also not yet reached the stage of appointing external advisers to assist it in its deliberations.

Comments made by Sir Victor Blank, Lloyds’s Chairman, on Friday that the bank might look to take advantage of falling valuations in the banking sector, however, were seen by analysts as taking the city’s temperature over any consolidation move by Lloyds. Eric Daniels, the bank’s Chief Executive Officer, expressed similar sentiments about takeover opportunities.

Lloyds TSB and A&L declined to comment.

British banking stocks have been hammered alongside their international counterparts in recent months, and efforts by Lloyds to strike a deal to buy Northern Rock last summer faltered after being blocked by the government. At Friday’s closing prices, A&L was worth just £2.2bn while B&B was valued by the stock market at half that level.

Lloyds has focused largely on domestic and organic growth in recent years, leading some analysts to criticise it for being too cautious.
However, the strategy has enabled it to escape the worst ravages of the crisis that began in the American mortgage market, Sunday Telegraph said.

Alliance & Leicester, which shocked the city earlier this month with write-downs totalling £185 million, has already been approached by Santander, the Spanish owner of Abbey. The two sides discussed a deal that would have seen A&L retain its stock market listing.

The talks have been aborted, although A&L is continuing to take advice from JPMorgan Cazenove and Morgan Stanley about a defence against any potential predator. James Eden, a banking analyst at Exane BNP Paribas, said in a research note last week that “the probability of a takeover [of A&L] has increased, as funding synergies have become a lot more relevant to deal economics than in pre-credit crunch M&A frenzies”.