Lloyds Bank defeats legal battle over HBOS acquisition

Michael Lloyd

November 15, 2019

Lloyds Bank has defeated the legal battle posed by 5,803 former Lloyds TSB shareholders, challenging the bank over acquiring HBOS in 2009, BBC News has reported.

Halifax and the Bank of Scotland merged to create HBOS back in 2001. But the UK’s biggest mortgage lender collapsed in 2008 and the takeover deal from Lloyds was completed in January 2009.

Wayne Kitcat of the client committee said this takeover left the shareholders destitute. The lender was reportedly laden with a poor mortgage book.

Meanwhile, a spokesperson from Lloyds Banking Group said that the group welcomes the judge’s decision.

Lloyds had to receive a state bailout of £20bn. Up until 2017 the government owned a stake in the business.

During the hearing, the judge heard the claim that directors had recommended the acquisition described as “disastrous”.

The judge was told Lloyds directors did not disclose that the lender secretly loaned HBOS £10bn after saying it planned to acquire the business.

The judge heard that the US Federal Reserve gave HBOS $14.5bn worth of covert financial support and The Bank of England also handed HBOS an “Emergency Liquidity Assistance” loan of £25.65bn

Wayne Kitcat of the client committee said: “The decision of the judge is a bitter disappointment to thousands of Lloyds shareholders many of whom have been left destitute by the acquisition of HBOS by Lloyds.

“This includes many thousands of Lloyds employees who were persuaded to put money into the Lloyds SAYE scheme to buy Lloyds Shares and relied on the senior management’s recommendation to do so.

“The judge’s decision seems to be characterised by giving the benefit of the doubt to the directors. This smacks of the elite getting away with it again.

“It makes no sense to us that the judge acknowledges that material information ought to have been disclosed, but does not believe that the Lloyds Board deliberately concealed it, or that it made any difference.

“But the numbers were vast: a £10 bn repo loan from Lloyds to HBOS,  £25bn of ELA from the Bank of England and $16bn from the Federal Reserve bank NY – none of which were disclosed.

“We hope that a higher court will come to a different conclusion as we are determined to continue this legal battle.”

A spokesperson from Lloyds Banking Group said: “The group welcomes the court’s decision. Throughout this process, the group has sought to act in the interests of our shareholders as a whole.”

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