Lloyds TSB in 'tentative' talks over Dresdner bid

Published on Sunday 22 June 2008 20:41

BANKING group Lloyds TSB, owner of Scottish Widows, is believed to be mulling a potential £6 billion bid for Dresdner Bank, owned by the German insurer Allianz.

One option thought to be under consideration involves Lloyds swapping Widows's life assurance arm for Dresdner's retail operations. It is believed approaches have been tentative, however, and no deal may emerge.

Speculation has risen that Lloyds may be interested in a cross-border takeover as its chief executive, Eric Daniels, told a recent British Bankers Association meeting there was scope for industry consolidation.

However, Daniels also said at Lloyds's annual results earlier this year that UK organic expansion remained a priority.

Analysts believe that Lloyds is better placed than most to consider acquisitions because, with its heavy UK bias, it has emerged relatively unscathed from the global credit crisis.

The bank has not had to take large write-offs related to subprime investments, unlike rivals Royal Bank of Scotland and Barclays. As such, Lloyds has not had to copy RBS, HBOS and Bradford & Bingley by launching a rights issue.

Other possibilities said to be under review by Lloyds chairman Victor Blank and Daniels include the purchase of Postbank, Citigroup's German retail banking network.

Allianz has declared its intention to spin off Dresdner, although it may also look to bid for other banking assets to merge with its existing operation.

Analysts say that now is a good time for acquirers to exploit declining valuations in the financial services sector.

It is expected that the huge losses sustained by banks from the subprime crisis will lead to a round of consolidation in Europe and America.

Lloyds has a stock market value of 19 billion.