Lloyds shareholders take action on HBOS takeover

The UK Shareholders Association (UKSA) today said it was forming an action group to represent smaller investors in Lloyds Banking Group in the wake of its latest bail-out from British taxpayers.

The UK Shareholders Association (UKSA) today said it was forming an action group to represent smaller investors in Lloyds Banking Group in the wake of its latest bail-out from British taxpayers.

The UKSA has received complaints from more than 200 shareholders in the former Lloyds TSB so far following its takeover of struggling HBOS last autumn.

The organisation has also taken complaints from HBOS shareholders concerned over the actions of the bank's previous management.

The new bank has been given £17bn (€18.35bn) in taxpayers' cash, giving the Government a controlling 65% stake.

This holding could rise as high as 77% following a deal to insure £260bn (€280.7bn) in toxic debts - mostly inherited from HBOS - struck a week ago.

HBOS had an estimated two million smaller shareholders, and Lloyds 800,000. UKSA spokesman Roger Lawson said: "We will be considering what actions we might take to oppose this further erosion of shareholder value, and creeping government control of the bank, including legal action and discussions with institutional shareholders."

The takeover has been a particularly heavy blow for former Lloyds TSB shareholders. The bank was one of the most conservative players before the credit crisis struck - actually making a profit last year - but HBOS crashed to losses of almost £11bn (€11.9bn).

But a Lloyds spokesman pointed out that 96% of Lloyds TSB shareholders supported the takeover last November. An overwhelming majority of HBOS investors also backed the move, amid warnings that the bank could face nationalisation if the deal fell through.

"We believe that our acquisition of HBOS is very much in the interest of our shareholders. In our view the strategic rationale for the deal is compelling, and it will deliver significant benefits for our shareholders in the medium-term.

"We now have market-leading positions across a range of important product lines including retail banking, general insurance, investments and corporate banking," the spokesman said.

He added that the bank had struck a "good deal" over the terms of its participation in the Government's Asset Protection Scheme, which would "significantly strengthen" its finances.

But Mr Lawson said: "A 'bad' bank has simply been combined with a "good" bank to make one larger 'bad' bank."

Under the terms of participation in the APS Lloyds will lend £28bn (€30.3bn) to homeowners and businesses over the next two years.

"(This) may be in the interest of the wider economy, but is to the disadvantage of shareholders unless done on proper commercial terms," Mr Lawson said.

The fresh protests are set to add to the pressure on Lloyds chief executive Eric Daniels and chairman Victor Blank, who brokered the takeover.

Mr Daniels told MPs last month that Lloyds TSB would have put in "somewhere around three to five times as much time" on due diligence on the HBOS deal if it had had more time and unlimited access to the firm's books.

Mr Lawson also launched a wider campaign to ensure the banking sector crisis was not repeated, adding: "We do wish there to be a proper investigation of what took place historically, and accountability where error is obvious."

Meanwhile, banking giant Barclays - which has so far avoided taxpayer support - was this weekend said to be looking at a potential sale of its Global Investors asset management arm to raise £4bn (€4.3bn) to strengthen its capital position.

According to the Sunday Times, the bank was also sounding out the Briutish Treasury over placing £10bn (€10.8bn) in loans in the APS, but paying cash as a fee to avoid a Government stake.

Barclays declined to comment. A British Treasury spokesman said: "Other banks would have to approach the Government if they wanted to use the scheme."

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