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Lloyds in talks to buy bank
The latest bank to suffer through the credit crunch is HBOS. It is Britain’s biggest mortgage lender but its shares have seen a sharp fall as investors dump them worried about the banks over exposure to the mortgage market. Shares in HBOS fell by over 50 per cent to just above 80p.
Talks regarding Lloyd’s take over emerged as the Financial Services Authority was pressured to issue a statement to stop a further free fall in the share price. The FSA announced the move by Lloyds and the share price immediately increased by 15 per cent.
The bank has £258 billion worth of deposits and 15 million savers. One of the main concerns about HBOS is their dependence on the wholesale money markets which has funded their mortgage lending and the fact that the amount of loans it has outstanding is almost twice the amount it has in deposits. The cost of borrowing money on the wholesale market is likely to rise in light of the recent collapse of the Lehman Brothers investment bank. Deposits at HBOS, however, are regarded as safe by financial experts due to the Government lending a helping hand to Northern Rock.
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