HBOS ‘to reveal further £5bn writedown’

British financial giant HBOS is planning to reveal further multibillion-pound writedowns this week amid mounting speculation of a rival bid to scupper its planned tie-up with Lloyds TSB, a report said today.

The troubled bank is expected to unveil an additional hit of up to £5bn (€6.4bn) when it updates the market this week, according to The Sunday Telegraph newspaper.

HBOS warned last month that its profits were being squeezed by bad debts and asset value markdowns, while it was also suffering from increased funding costs in stricken wholesale money markets and falling property prices.

The expected hefty writedowns - due to come in a statement to coincide with a trading update from Lloyds - will underline the trading troubles faced by HBOS as it seeks to secure the tie-up with white knight suitor Lloyds.

But the deal could face the threat of a rival offer as it emerges that a government minister had discussed a new mystery bid.

Scottish Secretary Jim Murphy has had talks with Jim Spowart, the founder of HBOS-owned Intelligent Finance, about the possibility of a group putting together an alternative offer for HBOS.

The Edinburgh-based banking giant has already agreed its £12bn (€15.2bn) merger with Lloyds, but Mr Murphy and Mr Spowart had further talks over the potential new deal yesterday.

Mr Spowart, who left the HBOS group more than four years ago, told the BBC: "This is a genuine, genuine interest."

As many as 15,000 to 20,000 could reportedly go in total across the two groups, with hundreds of branches also at risk of being axed.

Mr Murphy confirmed he had had talks with Mr Spowart and said: "I have spoken to the Treasury and if there is a second serious bid then the Treasury would be happy to talk to them."

The possibility of a second deal emerged after Friday's official British government approval for Lloyds TSB's planned merger with HBOS.

Overruling competition concerns raised by the Office of Fair Trading, British Business Secretary Peter Mandelson said the public interest of "preserving the stability of the financial system" outweighed any potential anti-competitive effects.

Mandelson said: "I am satisfied that on balance the public interest is best served by allowing this merger to proceed without a reference to the Competition Commission."

The British government said on intervening in the merger case that it had to consider the wider confidence in the banking system and HBOS's "systemic importance" to the UK banking system.

But the merger has come under fire in Scotland, where there are concerns of job losses and a negative impact on the Scottish economy.

Earlier this week Scottish First Minister Alex Salmond met Lloyds TSB bosses in London to lobby for Scottish interests should the merger go through.

A spokesman for Mr Salmond said: "If any new bid or management team emerges for HBOS, the First Minister will approach that in exactly the same way he approached the Lloyds TSB bid, which is making the positive case for Scotland and making sure that those involved see the value of retaining jobs and decision making in Scotland.

"Any bid has to be judged against what is in the best interests of Scotland in terms of jobs, decision-making and competition."

Lloyds unveiled its proposed rescue of smaller rival HBOS in mid-September.

The deal would create far and away the biggest British bank with nearly a third of the UK mortgage market, more than £300bn (€381.8bn) of deposits and about 3,000 branches.

British Chancellor Alistair Darling confirmed on news of the deal that the UK government would waive competition requirements to ensure it went through, saying it was needed to shore up the financial system.

HBOS had seen its shares suffer devastating falls amid concerns over the bank's future in the days leading up to the deal announcement.

It has been hit hard by the credit crunch, revealing a 72% plunge in profits for the first half of the year.

The group also said it had seen a 36% leap in bad debt charges as consumers and businesses struggled with repayments and falling house prices.

HBOS is turning to the Government for £3bn (€3.8bn) under its part-nationalisation scheme, having already asked shareholders for £4bn (€5bn) in a rights issue earlier this year.

An HBOS spokesman today declined to comment on the potential rival offer, but reaffirmed the bank's commitment to the Lloyds deal.

"We have a recommended deal with Lloyds TSB which brings certainty and tangible financial benefits to our shareholders."

Other politicians said questions had to be asked about whether Mr Murphy had disclosed confidential information, however.

The SNP's Alex Neil accused him of breaching the ministerial code of conduct - and called on British Prime Minister Gordon Brown to investigate.

Mr Neil, a member of the Scottish Parliament's Finance Committee, also said Mr Murphy should resign if he was found to have broken the code.

The Nationalist MSP said: "If he has broken the ministerial code he's not fit to be a minister, he's not fit to be in the Cabinet."

Scottish Deputy First Minister Nicola Sturgeon told BBC Scotland's Politics Show: "If the Secretary of State did divulge confidential information about a possible alternative bid then that's a very serious matter indeed.

"I do think serious questions have to be asked. I think there are questions and I think the matter does merit investigation."

She added: "I'm not going to speculate about the detail of any potential alternative bid, I think all bids have to be looked at and scrutinised on their merits.

"But what I think is absolutely essential is at the heart of any discussion around this are the issues of retaining as many Scottish jobs as possible and as much Scottish decision-making as possible."