The former chairman of Lloyds has told the High Court that if it had not proceeded in acquiring HBOS in the financial crash, UK banks “may not have been able to open on Monday morning”.
Sir Victor Blank was being questioned yesterday by lawyers for a group of 5,803 former Lloyds TSB shareholders who claim they were “mugged” when the bank recommended the January 2009 deal without disclosing HBOS’s true financial state.
They are suing the bank and Blank, Lloyds Banking Group ex-chief executive Eric Daniels; former chief financial officer Tim Tookey; former director of retail banking Helen Weir; and ex-director of wholesale banking George Truett Tate over alleged losses of more than £550 million.
Richard Hill QC, for the shareholders, has claimed the directors recommended the “disastrous” acquisition, knowing that HBOS was on “emergency life support” from central banks and Lloyds itself.
Hill has alleged that the Lloyds board rushed into the deal and that the circular sent to shareholders was “highly misleading”.
The acquisition left Lloyds with toxic assets and it was later forced to take a government bailout worth £20.3 billion, which has been partly blamed on the takeover.
Blank referred to the “massive banking crisis” at the time of the HBOS acquisition, adding that he believed if Lloyds had decided not to proceed, the government would have had to at least partly or fully nationalise HBOS.
“Were this to have happened, Lloyds and the rest of the UK banks may not have been able to open on Monday morning,” Blank added.
“If a major bank such as HBOS had collapsed then the market would have been thrown into turmoil, there probably would not have been adequate funding available for Lloyds or many other major UK banks, and I believe that the uncertainty would have caused the government to call a bank holiday.”
On the shareholder allegations that there was no value in HBOS, given that it was on life support from the Bank of England, the Federal Reserve and Lloyds itself, Blank said: “It is my view that there was significant value in HBOS at the time of the acquisition and there was also great potential for future revenues and synergy opportunities.
“Indeed I continue to believe that Lloyds is a stronger bank today with HBOS than it would have been without it.”
Helen Davies QC, for Lloyds, has called the case “fundamentally flawed at every level” with the allegations of wrongdoing “entirely devoid of merit”.
The case continues.