HBOS's weight on shareholders' shoulders

Published on Sunday 16 November 2008 20:06

JIM Spowart, the financier involved in trying to find an alternative bidder for HBOS other than Lloyds TSB, has admitted he has given up on the project, largely due to discouragement from the Treasury. According to Mr Spowart: "We weren't encouraged at all. I think we were discouraged." Is this then the end for HBOS as a separate company headquartered in Edinburgh and the demise of Scotland's oldest bank?

In fact, the questions that have been asked repeatedly about the efficacy of the Lloyds TSB takeover remain still to be answered. Following Mr Spowart's experience, the list only gets longer. Why, despite assurances from the Financial Services Authority that HBOS is viable as a stand-alone company, has the Treasury insisted on its de facto support for Lloyds TSB's swallowing up HBOS? Why has the Lloyds TSB management still not given any indication of the likely job losses at HBOS, or where they will be concentrated? Why, despite a damning report from the Office of Fair Trading, identifying a serious threat to competition if the takeover went ahead, did the Business Secretary, Lord Mandelson, set aside the normal rules to let the takeover proceed?

The future of HBOS is now in the hands of the shareholders of the bank and those of Lloyds TSB. They are being urged by the directors of HBOS to proceed with the takeover. But the executives whose inadequate business judgment brought HBOS near to ruin are hardly in a position to advise the shareholders. Indeed, many will suspect that the desire of the old HBOS team to hand over to Lloyds TSB is a way of escaping personal responsibility. Of course, should HBOS go it alone, it would require to take advantage of Treasury cash for recapitalisation – effectively nationalising the bank. However, Northern Rock, which ended up in a similar position, is rapidly paying off its state loans and there is no reason why HBOS should not do the same.

Equally, apart from the raid on HBOS's market share – approved by Lord Mandelson – what is in the deal for Lloyds TSB shareholders? Heavyweight commentators, including the Financial Times and the Economist magazine, have come out against the takeover. Lloyds TSB shareholders should ponder that before instantly toeing the Treasury line.

As Mr Spowart found out, the Treasury seems to have its own agenda in this takeover – which suggests there is anything but a level playing field involved. It might be as simple as the Treasury, having agreed to the takeover during the market panic in September, is unwilling to be seen to change its mind. But since mid October, when the Treasury agreed to recapitalise all the major UK banks, the rationale for the takeover has evaporated.

This weekend's G20 summit reaffirmed the need for more efficient, regulated financial markets. Letting Lloyds TSB swallow up HBOS hardly falls into that category. HBOS shareholders should think hard before letting it happen.

Bunkered, or still on the fairway?

ONLY a few weeks ago, Donald Trump was reassuring Scotland that he had "a lot of cash" to finance his new golf course in Aberdeenshire, frequently referred to as costing 1 billion. It now transpires Mr Trump is having money problems back in America because of the credit crunch.

He is demanding more time to repay a 424 million loan borrowed to build the 92-story Trump International Hotel and Tower in Chicago. Mr Trump wants to trigger a clause in the loan agreement reserved for "acts of war and natural disasters", according to reports. The Trump Tower is due to be completed next year but is having difficulties in selling apartment space.

None of this implies necessarily that he is unable to complete the Aberdeenshire project. In any case, with planning permission granted for what is a highly desirable recreational and housing development, the worst that might happen is a delay in construction. Yet Mr Trump has never been entirely forthcoming about the financing of the Aberdeenshire development and the reality of the 1 billion cost figure has always been vague. It would be a shame if this already controversial plan were to be mired in financial difficulties.

Today, Mr Trump's organisation claimed to have the 1 billion "in the bank" and be ready to proceed with the golf development. For Aberdeenshire and Scotland, we look forward to a Trump hole in one.

Nights of a thousand stars

IN THE year 1609, the Italian philosopher Galileo Galilei first looked at the heavens through a telescope. As a result, man's place in the universe changed forever. Today, four centuries later, half of the world's six billion inhabitants live in cities where the night sky is obscured by bright lights and industrial smog. We are possibly the first generation of humans since the dawn of time who do not have an intimate knowledge of the stars above us or how they move through the seasons.

As part of the 400th anniversary of Galileo's astronomical discoveries, VisitScotland and other bodies are launching a campaign to encourage tourists and locals alike to rediscover our night skies through a series of rural "dark sky parks". Scotland, with its large, under-populated rural spaces, is one of the best places in Europe to observe the night sky uninterrupted by urban light pollution. And our northern latitude means it is dark in winter for most of the day.

Is there a market for dark sky tourism in Scotland given that measurable rainfall occurs on more than 250 days a year in much of the Highlands, decreasing to a mere 175 days a year on the east coast. Actually, the rain is good for cleansing the atmosphere. One of the backers of the initiative, Professor John Brown, the Astronomer Royal, says: "If you don't look up you are missing half of life." He is right.