Great Britain Bank Mergers & Acquisitions (NatWest Group up to 2000)

Photo: NatWest's office at the heart of the City (of London) at No. 1 Princes Street. NatWest has been a subsidiary of the Royal Bank of Scotland Group since 2000.

[Limited-coverage page] NatWest has been a subsidiary of the Royal Bank of Scotland Group since 2000. In July 2020, however, The Royal Bank of Scotland Group adopted a "new" old name NatWest Group. Events after 2000 are listed under the here.

National Westminster Bank plc (NatWest Group) 

The creation of National Westminster Bank was announced in 1968 when two of Britain's then Big Five, National Provincial Bank and Westminster Bank, agreed to merge. When the combination was completed in 1970, the resulting bank was the 5th largest in the world. In 2000, however, NatWest was taken over by the Royal Bank of Scotland Group but it continues to operate under its own identity in England and Wales.

National Provincial Bank Ltd. 

In 1833, Thomas Joplin and other investors founded the National Provincial Bank of England after five years of preparation. The bank’s mandate was to provide banking services in England and Wales outside of London, so it could issue its own banknotes. At the time, the Bank of England enjoyed a monopoly in issuing banknotes within a 65-mile perimeter of London. National Provincial did maintain a purely administrative head office in the British capital. 

From 1834 onwards, branches were opened in Gloucester, Birmingham, Boston and many other towns. By 1865, through the acquisitions of many private and joint-stock rivals, the bank already operated 122 branches across England and Wales. Soon it became clear that London was too important a market for the bank to avoid and a London branch was opened, requiring the bank to surrender its privilege to issue banknotes. 

In 1880, National Provincial restructured itself as a limited liability company and modified its name to the National Provincial Bank of England Ltd. By 1900, further expansion increased the number of branches to around 200. 

In 1917, National Provincial acquired 50% of Lloyds Bank (France) Ltd., renaming it Lloyds & National Provincial Foreign Bank Ltd. in 1919, with branches in London, France, Belgium and Switzerland. In 1918, National Provincial merged with the Union of London & Smiths Bank Ltd., which had more than 230 branches. The new bank with 700 branches adopted the cumbersome name of National Provincial & Union Bank of England Ltd. In 1920, the bank acquired London private bank Coutts & Co., which was founded in 1692 and today continues to offer wealth management services under its own brand as part of the Royal Bank of Scotland Group. 

In 1924, the bank’s name was simplified to National Provincial Bank Ltd. It continued to expand during the inter-war years and after World War II by acquiring other banks domestically. In 1954, it divested its stake in Lloyds & National Provincial Foreign Bank back to Lloyds Bank. National Provincial acquired the Isle of Man Bank Ltd. in 1961, which continues to trade under its own name today. In 1962, National Provincial took over District Bank, the seventh largest London clearing bank with a substantial branch network in Northern England and the northern Midlands counties. National Provincial kept the District Bank identity until its merger with Westminster Bank in 1970. At the time of the amalgamation, National Provincial and District Bank together had a network of about 2,200 branches. 

Westminster Bank Ltd. 

Westminster Bank can trace its roots to the London & Westminster Bank and the London & County Bank. London & Westminster was the older of the two and was officially founded in 1834 in the City. As its name suggested, the bank’s main activities focused on central London but it also acted as the City agent to various country and foreign banks. By 1905, the bank had a network of 35 branches. 

London & County Bank was created in 1836 in Southwark as the Surrey, Kent & Sussex Banking Company. Southwark was a borough in the county of Surrey at the time, but is now part of London. Just one year after its founding, the bank moved its head office to the City and in 1839, adopted the name London & County Banking Co. The bank grew rapidly during the second half of the 19th century through a series of acquisitions. By 1875, London & County had a network of 150 branches in London and Southern England, the most of any British bank. 

In 1909, London & County and London & Westminster decided to combine into the London, County & Westminster Bank. London & County’s network of more than 260 branches in London and south and east of London was merged with London & Westminster’s 37 London branches. In 1917, the bank expanded outside of southern England and acquired Belfast-based Ulster Bank, gaining 170 branches in Ireland. Ulster Bank had been weakened by the political and social upheavals gripping Ireland following the Easter Rising of 1916. In 1918, National Provincial merged with Parr’s Bank of Warrington and London (with 235 full branches) to become the London County Westminster & Parr’s Bank. The new entity now operated 700 branches. 

London County Westminster & Parr’s sensibly shortened its name to Westminster Bank in 1923. Throughout the 1920s, Westminster acquired more banks in Nottinghamshire, Yorkshire and Guernsey. By 1968, Westminster had a network of 1,400 branches across Britain, Ireland and Northern Ireland. 

National Westminster Bank Ltd. 

In 1968, National Provincial Bank (including its subsidiary District Bank) and Westminster Bank (including subsidiaries Isle of Man Bank and Ulster Bank) agreed to amalgamate into the National Westminster Bank. The new bank adopted the three arrow-heads logo, which is still in use today. When the merger was completed in 1970, the bank had 3,600 branches, though branch consolidation reduced that number to 3,200 by 1979. 

In 1972, National Westminster introduced Access, the bank’s first credit card. Throughout the 1970s, the bank actively participated in financing oil exploration in the North Sea, as well as created an international division. In 1979, National Westminster bought National Bank of North America, which had 141 branches in New York State, marking the bank’s first retail network in the United States. 

Soon after the British financial services industry was deregulated in 1986, National Westminster entered the securities business by buying up stock-brokers and underwriters. In 1988, the bank’s U.S. unit acquired New Jersey’s First Jersey National Corp. Following this purchase, National Westminster Bancorp’s network totalled 340 branches in New York and New Jersey. 

In 1991, a major restructuring programme saw the bank’s various private banking businesses combining under the Coutts & Co. brand. Coutts & Co. had been part of National Provincial Bank since 1920. Then in 1992, NatWest Markets was created to handle the group’s corporate and investment banking products. 

In 1993, the bank launched NatWest Life to embark on the life insurance business. NatWest sold its American retail bank National Westminster Bancorp to Fleet Financial in 1995 for GBP 2.3-billion (USD $3.6-billion) to focus on its British operations. In the same year, the name NatWest Group was officially adopted.

NatWest’s fortune took a dramatic turn in 1999 that eventually culminated in the loss of its independence. The events all began in September 1999 when NatWest announced a friendly deal to acquire U.K. insurer and unit trust (mutual fund) manager Legal & General plc for GBP 10.7-billion. To many analysts and institutional shareholders, however, swallowing up and integrating Legal & General was the last distraction NatWest needed when the bank’s core business was already underperforming. NatWest's share prices promptly tumbled by 26% over the next few weeks. 

Two days after NatWest's share collapse, on 1999-09-24, the Bank of Scotland launched a surprise GBP 21.0-billion (USD $34.3-billion) hostile bid to take over NatWest. 

By early October 1999, NatWest’s CEO Derek Wanless had lost the board of directors’ confidence and resigned. The bank also abandoned its offer for Legal & General. Throughout October, NatWest announced cost-cutting plans to eliminate 1,650 jobs and to sell off Ulster Bank, fund management arm Gartmore, NatWest Equity Partners and Greenwich NatWest in the hope of persuading its shareholders to vote against selling out to the Bank of Scotland. 

NatWest’s struggle to remain independent became even more complicated on 1999-11-29, when The Royal Bank of Scotland (RBS) joined the foray and announced its own hostile bid for the embattled bank. Throughout December and January (2000), both Bank of Scotland and RBS jockeyed for shareholders’ support (from both their own and those of NatWest) and raised their respective bids to over GBP 25.6-billion (USD $41.7-billion). In early February, RBS secured a GBP 500-million financing from its own institutional shareholder Spanish banking giant Banco Santander Central Hispano (now Banco Santander). With the additional cash infusion from BSCH, RBS was able to increase the cash portion of its bid for NatWest, and won over the major shareholders of NatWest. 

On 2000-02-11, NatWest finally gave up its fight and recommended its shareholders to accept the offer from RBS. By this time however, the value of the offer had fallen back to GBP 21.0-billion due to a fall in RBS share prices. What began as a seemingly ordinary takeover bid for Legal & General ended up with NatWest losing its own autonomy. 

Interestingly, both Bank of Scotland and RBS were rather smaller than NatWest. So even RBS in the end "took over" NatWest in a cash-and-share purchase, the former shareholders of NatWest actually ended up owning 62% of the newly-enlarged Royal Bank of Scotland Group, with the former RBS shareholders owning the remaining 38%. Click here to return to the Index page.

Great Britain Bank Mergers & Acquisitions (Lloyds Banking Group)

Photo: A Lloyds TSB branch on Moorgate in central London. Photo was taken in September 2007.


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. 

Historically, banking in England, Scotland and Northern Ireland has always been quite separate from each other -- in other words -- English banks have very few branches and minuscule market share in Scotland and Northern Ireland, and vice versa for the Scottish and Northern Irish banks. This did not mean that the much more powerful English banks could not acquire or control banks in the other two "countries". (In terms of laws, business and banking, England and Wales are much more integrated.) 

During and after Word War I, a wave of cross-border amalgamations happened involving English banks acquiring the smaller and weaker Scottish and Northern Irish banks. In 1918, Lloyds took over the National Bank of Scotland. As in all the Anglo-Scottish banking acquisitions, they were "affiliations" instead of full mergers, as the Scottish banks (including the National Bank of Scotland) retained their own boards of directors, structure, names, branding and banknote issues. (In Scotland, banknotes are issued by the Scottish commercial banks instead of by the Bank of England.)

In 1921, Lloyds 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.

In Scotland, Lloyds' fully-owned National Bank of Scotland merged with the Commercial Bank of Scotland in 1959 to become the National Commercial Bank of Scotland. This diluted Lloyds' shareholding in the enlarged bank to 36.6%. Then in 1968, the National Commercial Bank of Scotland merged with the Royal Bank of Scotland, and Lloyds' stake in the newly formed National Commercial Bank of Scotland Group (eventually renamed the Royal Bank of Scotland Group) was diluted further to 16%, in which Lloyds held on to for quite some years.

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.

Recent transaction(s):

• 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 and consumer finance unit Losango Promotora de Vendas to HSBC for GBP 490-million (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 2004, Lloyds divested its Argentine and Colombian operations. Lloyds had 676 staff and 34 branches in Argentina and 667 staff and 17 offices in Colombia. The Argentine business was sold to Banco Patagonia Sudameris while the Colombian business was sold to Panama-based Primer Banco del Istmo. Terms of the transactions were not disclosed and believed to be immaterial in relation to Lloyds' scale.
• 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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Great Britain Bank Mergers & Acquisitions (HBOS)

Photo: A Bank of Scotland 100-Pound Sterling banknote from 1997. Unlike England, in which only the (central) Bank of England can issue paper currency, Scotland has authorized commercial banks to issue banknotes since 1695.

[Limited-coverage page]

In January 2009, HBOS plc was acquired by Lloyds TSB Group plc to form the new Lloyds Banking Group plc. Transactions that happened after January 2009 would be listed under the Lloyds Banking Group page.

HBOS plc


Halifax plc (formerly Halifax Building Society)

During the Industrial Revolution, hundreds of thousands of surplus farm labourers flocked to industrial towns to find jobs in the factories. Many towns experienced severe housing shortages and other social issues. The concept of "building society" was born under which working men pooled their (often minimal) savings together to form a club where loans were offered to the members to build or buy their own houses, one at a time. The lottery system was often used to decide who got to borrow first (to obtain the fund) to buy their property. As the original borrowers repaid the loans gradually, the funds were offered to other borrowers.

There were two types of building societies. In the "terminating building society" form, the mutually-owned building society was disbanded after the last member was housed. In the "permanent building society" form, clients could continue to deposit their savings into and borrow from the concern even after every original member had bought his property and repaid the loan. It was under these circumstances that the Halifax Permanent Benefit Building Society was established in Yorkshire in 1852. Over the decades, the permanent building societies have evolved into co-operative banks offering deposit, personal lending, mortgage and credit card services for the working class.

In 1997, the mutual member-owners of Halifax Building Society voted for demutualization. Its 7.5 million members became shareholders of the lender and Halifax plc was listed on the London Stock Exchange.


The Governor and Company of the Bank of Scotland

In 1694, the Bank of England was created to borrow money from the wealthy (including co-monarchs William and Mary) to finance England's war against France. In 1695, the Scottish Parliament decided to pass an act to establish its own public bank to promote Scotland's trade. Bank of Scotland is the only bank to have ever been established by an Act of the Scottish Parliament, and today remains the only business created by the Scots Parliament still in existence.

Bank of Scotland was a monopoly from its founding in 1695 until 1727, when rival Royal Bank of Scotland was finally permitted to open for business. Since its very beginning, Bank of Scotland has been issuing Scottish banknotes.

Historically, banking in England, Scotland and Northern Ireland has always been quite separate from each other -- in other words -- English banks have very few branches and minuscule market share in Scotland and Northern Ireland, and vice versa for the Scottish and Northern Irish banks.

In 1954, the Bank of Scotland took over the Union Bank of Scotland (founded in 1845). Then in 1971, the bank acquired Scotland's British Linen Bank from Barclays Bank. Edinburgh-based British Linen Bank was founded in 1746. In 1919, it was taken over by Barclays during a wave of Anglo-Scottish and Anglo-Irish bank consolidations stemming from the challenges faced by the smaller and weaker Scottish and Northern Irish banks during World War I. In acquiring British Linen Bank in Bank of Scotland shares, Barclays ended up with a 35% stake in Bank of Scotland, which it held on to for a number of years.

Recent transaction(s):

• In 1995, Bank of Scotland bought 100% of Bank of Western Australia (trading name BankWest) from the Western Australia state government. As part of the purchase agreement, 49% of BankWest was offered to the public in 1996.
• In 1996, the then Halifax Building Society bought the newly-demutualized insurer Clerical Medical for GBP 800-million. Clerical, Medical & General Life Assurance Society was founded by a London physician in 1824.
• In 1999, Bank of Scotland launched a hostile, GBP 21-billion (USD $34.3-billion) bid for its much bigger English rival National Westminster Bank, but eventually lost the bidding war to The Royal Bank of Scotland.
• In 2001, Halifax plc bought the world's oldest mutual insurer Equitable Life for GBP 1-billion. Equitable Life was established in 1762.
• In 2001, Bank of Scotland merged with Halifax plc in a deal worth GBP 26.0-billion (USD $40.0-billion). The newly combined holding entity was known as HBOS plc, though the brands Halifax and Bank of Scotland remained.
• In 2003, HBOS' Scottish Western Australia division acquired the 43% of BankWest that it didn't yet own for GBP 430-million (USD $688-million). BankWest became a wholly-owned subsidiary of HBOS.
• 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, and the inter-bank credit market froze during the summer of 2008. On 2008-09-17, following days of widespread fears that HBOS was insolvent, 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 raised by the Competition Commission resulting from a Lloyds-HBOS merger.
• 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 55.0-billion.
• In 2008, Commonwealth Bank of Australia acquired BankWest (Bank of Western Australia) and insurer and asset management firm St. Andrew’s Australia Pty. Ltd. from ailing HBOS for AUD $2.1-billion (GBP 808-million, USD $1.4-billion) in cash. HBOS had been close to financial insolvency and had just agreed to a sale to rival Lloyds TSB Group weeks earlier. HBOS would also receive AUD $360-million from a return of excess capital in BankWest, raising the total sale proceeds to AUD $2.5-billion (GBP 963-million, USD $1.66-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 (USD $22.29-billion).
• In January 2009, Lloyds TSB completed the HBOS acquisition and the new Lloyds Banking Group became the bank with the most market share 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.
• By August 2009, total write-downs on bad loans at the former HBOS divisions since the beginning of 2008 had reached over GBP 20-billion (USD $34-billion).

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