Lloyds Banking Group plc
Lloyds Banking Group was formed in early 2009 by the merger of Lloyds TSB Group plc and HBOS plc.
Lloyds Bank Ltd.
The origins of Lloyds Bank (unrelated to insurance broker Lloyds of London) date back to 1765, when John Taylor and Sampson Lloyd set up a private banking concern in the industrial heartland of Birmingham, England. During the 19th century Lloyds Bank expanded through dozens of acquisitions and by 1908, it became the world's largest bank in terms of deposits. In 1921, it acquired Fox, Fowler & Co. of Wellington, Dorset. Fox, Fowler was the last private banking business to issue its own banknotes in England. After 1921, the Bank of England became the sole banknote issuer in England. In 1967, Lloyds Bank acquired Lewis’s Bank from Martins Bank.
Lloyds Bank's once strong South American presence began in 1918 when it acquired a stake in London and River Plate Bank. London and River Plate then merged with the London and Brazilian Bank to form the Bank of London and South America (BOLSA). In 1971, BOLSA and Lloyds Bank Europe combined to form the Lloyds and Bolsa International Bank. The name was changed to Lloyds Bank International in 1974. It was only in 1986 that Lloyds Bank International was fully integrated into Lloyds Bank itself.
Trustee Savings Bank (TSB)
Unlike most other banks, Trustee Savings Bank was founded not by a typical capitalist but by a clergyman. In 1810, Reverend Henry Duncan of Ruthwell, Dumfriesshire, Scotland, launched a new type of bank to encourage his low-income parishioners to save for a rainy day and to learn about money management. Prior to Ruthwell Parish Bank's establishment, other banks required a minimum deposit of 10 pounds to open an account, an enormous amount at the time. At Ruthwell Parish Bank, depositors could open an account with as little as 6 pence.
Drawing on the experience he had gained from working at a Liverpool bank, Rev. Duncan managed all the deposits, withdrawals and loans all by himself. The deposits were pooled together and placed with the British Linen Bank earning 5% interest. The members of Ruthwell in turn received 4% interest on the whole pounds. He used the bank's surplus to run a charity fund for the poor and used the remuneration due to him to build a parish school.
Within six years of the creation of Ruthwell Parish Bank in 1810, the savings bank concept has spread across the U.K., Europe and the U.S. By 1818, Great Britain itself had 465 savings banks. The parish church where Rev. Duncan first set up his banking office has now been converted into the Savings Banks Museum. To honour TSB's heritage, Lloyds TSB today still commits a certain percentage of its pre-tax profits to the Lloyds TSB Charity Foundation.
In 1888, The Trustee Savings Bank Association was created to co-ordinate the hundreds of savings banks' operations in the U.K. In 1973, the Central Trustee Savings Bank was set up to provide banking and clearing service between member banks. In 1975, a major combination saw the number of savings banks reduced to 73 within Great Britain.
Then in 1983, another re-organization saw the further consolidation of individual savings banks into TSB England and Wales, TSB Scotland, TSB Northern Ireland and TSB Channel Islands. However, at this point, the various TSB's were still mutually owned by their members. This changed in 1985 with the TSB Act opening the door for the flotation of the various TSB's. Interestingly, it was the relatively smallish TSB's that pioneered telephone banking in the U.K. in 1987.
In 1989, TSB England and Wales became TSB Bank plc. In 1990, TSB Scotland and TSB Northern Ireland joined TSB Bank plc. In 1991, Allied Irish Banks bought TSB Northern Ireland from TSB Bank plc to form the First Trust Bank. The following year, TSB Channel Islands joined TSB Bank plc also.
In 1995 Lloyds Bank acquired TSB Bank for GBP 5.0-billion and became known as the Lloyds TSB Group plc.
- In 1986, Lloyds Bank launched a hostile bid for British colonial bank Standard Chartered Bank, but the attempt failed and Standard Chartered remained independent.
- In 1988, Lloyds Bank swapped five business units for 380 Abbey Life Group plc shares, effectively acquiring a 57.6% stake of the new Lloyds Abbey Life Group.
- In 1992, Lloyds Bank plc and The Hongkong and Shanghai Banking Corp. engaged in a brief bidding war for Midland Bank plc. The Hongkong and Shanghai had already held 14.9% of Midland Bank since 1987; and in 1992 was in the process of buying out the remaining shares of Midland. Lloyds Bank plc made an offer worth GBP 3.7-billion (USD $6.6-billion) for Midland Bank plc, but withdrew the offer shortly after The Hongkong and Shanghai Bank raised its offer to GBP 3.9-billion (USD $7.1-billion).
- In 1994, Lloyds Bank bought British mortgage lender Cheltenham & Gloucester Building Society (C&G) for USD $2.7-billion.
- In 1995, Lloyds Bank acquired the remaining 37.3% of Abbey Life that it didn’t already own, making Abbey Life a wholly-owned subsidiary of Lloyds Bank.
- In 1995, Lloyds Bank and TSB Bank joined forces to form Lloyds TSB Group plc.
- In 1997, Lloyds TSB bought out its Brazilian partner Multiplic Empreendimentos's 50% stake in Banco Multiplic S.A. for USD $600-million to become the Brazilian bank's sole owner. Lloyds's partnership with Multiplic began in 1988. Following the acquisition, the bank was renamed Banco Lloyds TSB S.A.-Banco Multiplo.
- In 1998, Lloyds's New Zealand unit National Bank of New Zealand (NBNZ) bought Countrywide Banking Corp. from Bank of Scotland for NZD $850-million. The purchase turned NBNZ into the country's No. 2 bank.
- In 1999, Lloyds took over life insurer and pension fund manager Scottish Widows for GBP 7.0-billion (USD $11.2-billion).
- In 2000, Lloyds bought Chartered Trust from Standard Chartered Bank for GBP 627-million.
- In 2001, Lloyds’ attempt to buy British mortgage bank Abbey National plc for GBP 18.0-billion was vetoed by the British anti-trust authority.
- In 2003, Lloyds divested its Brazilian banking unit Banco Lloyds TSB S.A.-Banco Multiplo to HSBC for USD $815-million.
- In the same year, Lloyds also sold off its National Bank of New Zealand (NBNZ) to Australia and New Zealand Banking Group for AUD $4.92-billion (GBP 2.25-billion).
- In 2007, Lloyds’ insurance and pension management subsidiary Scottish Widows sold Abbey Life Assurance Co. to Deutsche Bank AG for GBP 977-million (Eur 1.4-billion, USD $1.98-billion). Abbey Life Assurance managed GBP 12-billion (USD $24.3-billion) of assets and had 1.2-million policies. The Abbey Life Assurance sold by Lloyds TSB was unrelated to the life insurance businesses sold by Abbey plc (part of Spain's BSCH) to Resolution plc, which also occurred in 2007.
- Following the burst of the U.S. housing bubble in 2007, losses from the collateralized debt obligations (CDOs) soared to billions of dollars around the world. As the inter-bank credit market froze during the summer of 2008, the funding sources for banks dried up, pushing a number of banks to the brink of sudden bankruptcy. On 2008-09-17, following days of widespread fears that HBOS had become insolvent due to heavy losses, the bank announced that it was in advanced discussions to be bought out by Lloyds TSB Group. According to the BBC, British Prime Minister Gordon Brown and other senior officials brokered the merger talks, and the government would over-rule any anti-competitive objection from the Competition Commission.
- Within 24 hours of their announcement, Lloyds TSB agreed to acquire HBOS for GBP 12.2-billion (USD $22.29-billion, Eur 15.36-billion) in stock. HBOS shareholders would receive 0.8333 share of Lloyds TSB for each HBOS share. The new bank would have more than 3,000 branches and more than 140,000 employees, though branch closures and layoffs were expected. Existing Lloyds TSB shareholders would own 56% of the new bank, with the rest being owned by former HBOS shareholders. The new Lloyds TSB would be the mortgage market leader in Britain with a 28% market share. Lloyds TSB's GBP 12.2-billion offer underscored how much HBOS shares had collapsed: before the 2008 credit crisis began, HBOS had at one time a market value of more than GBP 55-billion.
- As more major financial institutions failed in the U.S., Britain, Belgium, Germany, and Iceland, investors sold off financial assets around the world including stocks, commodities, short-term commercial papers and corporate bonds. Most major stock markets fell by 15% to 20% in the trading week that ended on 2008-10-10. During an emergency summit held in Washington D.C., the world’s major finance ministers unveiled a plan under which the national governments pledged to bail out any major banks in financial difficulties and to provide unlimited loan guarantees for inter-bank lending, in order to restore confidence in the panicky financial markets. Under the partial nationalization scheme, the British Treasury provided GBP 37-billion (USD $64-billion, Eur 50-billion) to The Royal Bank of Scotland Group, HBOS and Lloyds TSB in return for holdings in the three banks. Barclays opted out from the government bail-out plan, but promised to raise GBP 6.5-billion on its own. HSBC was at the time not in need of new capital.
- In late 2008, the British government injected GBP 11.5-billion into HBOS in return for GBP 8.5-billion of HBOS ordinary shares and GBP 3.0-billion of preference shares. The government also injected GBP 5.5-billion into Lloyds TSB in return for GBP 4.5-billion of Lloyds ordinary shares and GBP 1.0-billion of preference shares. Meanwhile, Lloyds TSB revised the terms of its offer for HBOS from 0.833 Lloyds TSB share for each HBOS share to 0.605, reducing HBOS’ value to GBP 7.7-billion (USD $11.13-billion) from GBP 12.2-billion.
- In January 2009, Lloyds TSB completed the HBOS acquisition and the new Lloyds Banking Group became the market leader in Britain. The British Treasury's stake in HBOS was converted to Lloyds Banking Group shares. Following the combination, 43.5% of Lloyds Banking was held by the British government, 36.5% was held by the former Lloyds TSB shareholders, and the remaining 20% was held by the former HBOS shareholders.
In March 2009, following months of uncertainties over the financial stability of the new Lloyds, the British government agreed to insure GBP 260-billion (USD $359-billion) of Lloyds’ loan losses. Under the Asset Protection Scheme (APS), Lloyds Banking Group would issue GBP 15.6-billion (USD $21.5-billion) of non-voting, convertible class “B” shares to the British government in return for state insurance against further losses on the risky loans. The state’s holding in Lloyds Banking Group could rise to 62% if the government’s class “B” shares were converted to ordinary shares. (This deal was cancelled in November 2009. See below.)
- In August 2009, Lloyds sold its Insight Investment Management unit to the Bank of New York Mellon Corp. for GBP 235-million (USD $387-million). The unit managed about GBP 80-billion of assets.
- In November 2009, Lloyds reached an agreement with the British and EU governments to raise GBP 21-billion (USD $34.5-billion) in new capital and to reduce the bank’s market share. Under the plan, Lloyds raised GBP 13.5-billion from a fully-subscribed rights issue, and swapped GBP 7.5-billion of existing bonds into debt-like contingent core Tier 1 securities (CoCos), which were convertible into equity should the bank’s core capital fall below 5%. To maintain its current stake, the British government subscribed to 43% of the rights issue, injecting GBP 5.8-billion of taxpayer money into the bank. Lloyds also agreed to pay the government GBP 2.5-billion for having been under the GBP 260-billion loan loss guarantees for eight months. Lloyds would now exit the GBP 260-billion APS guarantee program. In terms of asset sales, the bank agreed to sell its Cheltenham & Gloucester mortgage unit, all of TSB Scotland’s branches and Intelligent Finance on-line division to reduce market concentration by the end of 2013.
- In June 2010, Lloyds sold one of its private equity portfolios for GBP 332-million (USD $501-million) to Coller Capital. The portfolio sold would be folded into a joint-venture called Cavendish Square Partners LP, in which Lloyds would retain a 30% stake.
- In July 2012, Lloyds agreed to transfer 632 branches in Britain, along with 7,000 staff and 4.8-million client accounts to mutually-owned the Co-operative Bank for up to GBP 750-million (USD $1.17-billion). The sale was part of the EU requirement for Lloyds to receive state aid after its disastrous purchase of HBOS plc in 2007. The sale price was much less than the GBP 1.5-billion to GBP 2.0-billion expected, as nervous rivals were reluctant to pay a high price in the midst of the EU-Euro Crisis. However, only GBP 24-billion (USD $37.5-billion) of assets (loans) would be transferred to the Co-op, as opposed to the originally-planned GBP 70-billion (USD $109.4-billion). The purchase would transform the Co-op into one of Britain's largest banks for the first time overnight.
- In March 2013, Lloyds sold a 20% stake in wealth manager St. James's Place plc to institutional investors for GBP 520-million (USD $776-million). Following the sale, Lloyds would still hold 37% of the firm. Lloyds inherited St. James's Place when it took over HBOS plc in 2008.
- In April 2013, Lloyds sold its Spanish retail banking operations to Spain's Banco de Sabadell for GBP 72-million of Sabadell stock. Lloyds may be entitled to another GBP 17-million in cash if the unit sold meets certain performance criteria in the next five years.
- Also in April 2013, the Co-operative Group plc announced that it has cancelled the agreement to acquire 632 branches from Lloyds Banking Group for GBP 750-million. Lloyds would now re-brand the branches as TSB, reviving the old bank name that was retired when Lloyds Bank and the old TSB Bank merged in 1995. Lloyds would then spin off the new TSB in an IPO in order to comply with the EU's requirements for Lloyds to accept state aid from the British government. Meanwhile, Lloyds TSB's own branches would be re-named Lloyds Bank.
- In June and September 2014, Lloyds Banking Group listed 50% of TSB in an IPO that raised about GBP 661-million (USD $1.06-billion). The IPO was well-received by the market. Lloyds was required to fully spin off TSB by the end of 2015.
- In March 2015, Lloyds agreed to sell its remaining 50% stake in TSB Bank to Spain's Banco de Sabadell for GBP 850-million, fulfilling the EU requirement that 630 Lloyds branches be spun off into a separate entity to maintain reasonable competition in the British market. Banco de Sabadell would offer to buy the other 50% of TSB Bank that is publicly-traded, making the entire purchase worth GBP 1.7-billion (EUR 2.35-billion, USD $2.53-billion). TSB had over 630 branches and 4.5-million clients in Britain, and would become Banco de Sabadell's first significant market outside of Spain.
- In December 2016, Lloyds agreed to buy MBNA Ltd., which is Bank of America's British credit card operations for GBP 1.9-billion (USD $2.35-billion). MBNA Ltd. had five million customers and GBP 7-billion of receivables. The purchase would raise Lloyds' share of the British credit card market to 26% from 15%, and some watchers wondered if the anti-competition authorities would challenge the transaction. The purchase represents Lloyds' first major acquisition since the global credit crisis started in 2008.
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