Decision expected soon on new Abbey bid

Potential Abbey National bidder HBOS would present an offer for its high street rival as good for competition and customers, it was reported today.

The Halifax and Bank of Scotland company has still to decide whether to challenge Banco Santander Central Hispano’s agreed offer for Abbey, which currently values the operation at approaching £9bn (€13.2bn).

A decision is thought to be only days away, although the Sunday Telegraph said HBOS would look to position itself as a powerful rival to the Big Four clearing banks – HSBC, Royal Bank of Scotland, Barclays and Lloyds TSB – if it did bid.

Amid concerns about competition clearance, HBOS will argue that its increased presence could force the Big Four to offer better interest rates to customers.

The report said it will also look to pass on some of the cost savings from a takeover to its customers in the form of higher interest rates on current accounts and lower rates on loans to small business clients.

Analysts believe HBOS could achieve £770m (€1.1bn) in cost savings and increased revenues, although some of this will be at the expense of branches.

It is expected Santander’s offer will secure clearance from the European Commission on Friday before the bank proceeds to posting its formal offer document to Abbey National shareholders.

But a counter-offer from HBOS – possibly worth £10bn (€14.7bn) – is almost certain to trigger an investigation by the Competition Commission as the two UK operations would hold more than third of the UK mortgage market.

It was also reported in the Sunday Times that Northern Rock had appointed lawyers to construct a case saying a deal would be anti-competitive.

Santander has already said it would look for savings of €450m in a move that would result in 3,000 job losses at Abbey.

Analysts expect a deal with HBOS to generate far more job cuts as around 70% of Abbey’s 741 branches are within a quarter of a mile of an HBOS outlet.

Santander does not have a branch network in the UK and will instead seek efficiencies through improvements to IT systems. Abbey currently has a 26,000-strong workforce.