Lloyds Banking Group plc is a British financial institution formed through the acquisition of HBOS by Lloyds TSB in 2009. It is one of the UK’s largest financial services organisations, with 30 million customers and 65,000 employees.[3] Lloyds Bank was founded in 1765 but the wider Group’s heritage extends over 320 years, dating back to the founding of the Bank of Scotland by the Parliament of Scotland in 1695.[4] The Group’s headquarters are located at 25 Gresham Street in the City of London, while its registered office is on The Mound in Edinburgh. It also operates office sites in Birmingham, Bristol, West Yorkshire and Glasgow.[5] The Group also has extensive overseas operations in the US, Europe, the Middle East and Asia. Its headquarters for business in the European Union is in Berlin, Germany.[6] The business operates under a number of distinct brands, including Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows. Former Chief Executive António Horta-Osório told The Banker, “We will keep the different brands because the customers are very different in terms of attitude”.[7] Lloyds Banking Group is listed on the London Stock Exchange (LSE) and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately GB£27.1 billion as of 1 December 2020 — the 19th-largest of any LSE listed company[8] — and has a secondary listing on the New York Stock Exchange.
Origins[edit]
Lloyds Bank is one of the oldest banks in the UK, tracing its establishment to Taylors and Lloyds founded in 1765 in Birmingham by button maker John Taylor and iron producer and dealer Sampson Lloyd II.[9] Through a series of mergers, Lloyds became one of the Big Four banks in the UK.[10]
Bank of Scotland, which originated in the 17th century, is the second-oldest surviving UK bank after the Bank of England. In 2001, a wave of consolidations in the UK banking market led the former Halifax Building Society—which originated in 1853—to agree to a £10.8 billion merger with Bank of Scotland.[11]
Trustee Savings Bank (TSB) can trace its roots back to the first savings bank founded by Henry Duncan in Ruthwell, Dumfriesshire, in 1810. TSB itself was created in 1985 by an Act of Parliament that merged all the remaining savings banks in England & Wales as TSB Bank plc and in Scotland (except Airdrie Savings Bank) as TSB Scotland plc.[12]
Lloyds/TSB merger[edit]
Park Row Leeds branch of Lloyds Bank, with a sculpture of the black horse (called Cancara) in the foreground
In 1995, Lloyds Bank plc merged with TSB Group plc, forming Lloyds TSB Group plc.[13]
In 2000, the group acquired Scottish Widows, a mutual life-assurance company based in Edinburgh, in a deal worth £7 billion.[14] This made the group the second-largest UK provider of life assurance and pensions after Prudential. In September the same year, Lloyds TSB purchased Chartered Trust from Standard Chartered Bank for £627 million to form Lloyds TSB Asset Finance Division, which provides motor, retail and personal finance in the United Kingdom under the trading name Black Horse.[15]
Lloyds TSB continued to take part in the consolidation, making a takeover bid for Abbey National in 2001, which was later rejected by the Competition Commission.[16] In October 2003, Lloyds TSB Group agreed on the sale of its subsidiary NBNZ Holdings Limited—comprising the Group’s New Zealand banking and insurance operations—to Australia and New Zealand Banking Group.[17] In July 2004, Lloyds TSB Group announced the sale of its business in Argentina to Banco Patagonia Sudameris S.A.[18] and its business in Colombia to Primer Banco del Istmo, S.A.[19]
On 20 December 2005, Lloyds TSB announced that it had reached an agreement to sell its credit card business Goldfish to Morgan Stanley Bank International Limited for £175 million.[20] In 2007, Lloyds TSB announced that it had sold its Abbey Life assurance division to Deutsche Bank for £977 million.[21]
Acquisition of HBOS[edit]
Head office of the Bank of Scotland at The Mound, Edinburgh.
On 17 September 2008, the BBC reported that HBOS was in takeover talks with Lloyds TSB, in response to a precipitous drop in HBOS’s share price.[22] The talks concluded successfully that evening with a proposal to create a banking giant which would hold a third of UK mortgages.[23] An announcement was made on 18 September 2008.[24][25]
On 19 November 2008, the new acquisition and government preference share purchase was agreed by Lloyds TSB shareholders.[26] HBOS shareholders overwhelming approved the deal on 12 December.[27] Lloyds TSB Group changed its name to Lloyds Banking Group upon completion of the takeover on 19 January 2009.[28]
On 12 February 2009, Eric Daniels, the CEO of the Group, was questioned about the banking crisis during a session of the Treasury Select Committee of the House of Commons. One of the key issues concerned Lloyds’ takeover of HBOS and the amount of due diligence carried out before the acquisition. Daniels said that a company would always like to do more due diligence on another company, but there are legal limits on how much is possible before an actual acquisition. Losses were slightly more than the £10 billion originally identified by the due diligence owing to write-offs of property loans because of falling property prices and the lack of demand for it. The then-Chairman of Lloyds, Sir Victor Blank, said in August 2009 that losses had been “at the worst end of expectations”, and that the Lloyds board was surprised by the speed at which the losses—which were caused by the unexpectedly sharp contraction of the world economy in late 2008 and early 2009—happened.[29] This position was confirmed by Archie Kane, a senior Lloyds executive in Scotland, in evidence to the Scottish parliament’s economy committee in December 2009.[30]
On 13 February 2009, Lloyds Banking Group said that the losses at HBOS were greater than had been anticipated, at around £10 billion. The share price of Lloyds Banking Group fell 32% on the London Stock Exchange, carrying other bank shares with it.[31]
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