HBOS Preparing to Launch Counter-bid for Abbey National

HBOS is plotting a counter-bid for Abbey National after being advised that it would be welcomed by shareholders and has a fair chance of winning approval from the competition authorities, it was reported yesterday.

The Edinburgh-based bank would argue that even though a merged HBOS-Abbey would have more than 30% of the mortgage market, the market is still highly fluid and competitive. In the current account and small business market, where much of the political attention has been focused, HBOS could argue that the combined share of HBOS-Abbey would create a fifth major player, but still with combined market shares of below 20% in both markets.

The "big four" – Royal Bank of Scotland, Lloyds TSB, Barclays, and HSBC – have more than 70% of the current account market and an even higher share of business accounts. Lloyds TSB was blocked from taking over Abbey three years ago, and last week ruled itself out of a counter-bid. James Crosby, however, chief executive of HBOS, has said only that he does not believe a bid will materialise from the big four.

Yesterday's report quoted banking sources as saying that HBOS has a team looking at bidding for Abbey, which last week agreed the £8.5bn merger with Spain's biggest bank, Banco Santander Central Hispano (BSCH), in what would be Europe's biggest cross-border banking takeover.

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