The decision by HBOS to explore a possible bid for Abbey National after appearing to rule itself out of the running has brought a new bout of Kremlinology to the City. Analysts and investors are desperately trying to work out whether public comments by bank bosses mean they are going to challenge Spain's Santander Central Hispano for Britain's sixth-largest bank.
Here is The Independent on Sunday's guide to those comments:
Chief executive James Crosby stated at the bank's results 10 days ago: "The idea that the big four banks will dive in to ensure some kind of competition inquiry without any realistic expectation that they can get through - that does not seem appealing to us." This was seen as ruling HBOS out; it mentioned the prospect of a long Competition Commission inquiry, along the lines of the one that stopped Lloyds TSB buying Abbey in 2001, and included the words "not ... appealing to us".
But HBOS is now pointing out that the bank is not one of the "big four" (despite being worth 20 per cent more than Lloyds TSB and having four times its market share in mortgages), so Mr Crosby's comments should not be taken as referring to HBOS.
The bank has now hired Lazard and Cazenove to review whether "a combination with Abbey would be in the best interests of its stakeholders". Even so, analysts rate its chances of bidding at little more than 50 per cent.
It bid £19bn for Abbey four years ago and must be relieved that the competition authorities blocked it. The City is desperate for the bank to bid again, so cannot have been encouraged by chief executive Eric Daniels, who said: "I don't believe any of the large local institutions will have a chance of passing a Competition Commission referral." Lloyds TSB's chairman, Maarten van den Bergh, did not help by moaning that "the idea of national champions is not alive in this country". Chances of bidding: minimal.
Royal Bank of Scotland
The biggest bank in Britain could have Abbey for breakfast if the regulators allowed it. But chief executive Fred "the Shred" Goodwin showed why few people think he is soft and cuddly, with the comment: "Even a mercy killing absorbs capital and absorbs time. I would wonder if a mercy killing would be the best use of that capital and time."
Given that Santander is RBS's largest shareholder and has two representatives on the Edinburgh bank's board, this was not the best choice of phrase. But the City got the message: no bid.
The global giant could also swallow Abbey without blinking - but will it? Stephen Green, the chief executive, appeared to be pouring cold water on any speculation, saying: "There is plenty we will be doing to grow in this market. We will be investing in growing organically." Still, HSBC is renowned for what it doesn't say rather than what it does. So the City believes the door is not completely closed and, if HBOS bid, HSBC might just have a go as well. Bid chances: about 35 per cent.
After sensational half-time figures, the City would love to back chairman Matt Barrett in a tilt at Abbey. But he appears not to want to play ball. "We're not reliant on transactions to achieve our strategic and financial goals," he said, before pointing out that the regulators would not allow Barclays to buy Abbey and "there is an opportunity for consolidation in Europe." So you know where he's looking. Chances of a bid for Abbey: less than 10 per cent.
Another global monster that has already held talks with Abbey about bidding. Chief operating officer Robert Willumstad told investors earlier this month: "our aspirational goal ... is a balance where international will represent 50 per cent of our earnings." It is currently 38 per cent.
International chief Sir Deryck Maughan added that key markets were Germany, Japan and the UK and "if we want to get to scale, not in all those markets but in some, in retail banking - that will require an acquisition." Analysts point out that Citigroup does not like making hostile bids, and speculation is centring on it going for Barclays or Lloyds TSB. However, the bid chances are at best 50/50.
A wild card. Retail director Jim Willens said in an interview that, if someone made an approach to the building society, "I think we would be willing to listen". However, Nationwide said these comments were taken out of context. Anyway, Abbey is not about to approach Nationwide, so the bid chances are zero.
Continental banks seem to be falling over themselves to cold-shoulder Abbey. Both BNP Paribas and ABN Amro said they thought cross-border deals would be hard. Credit Suisse said it would look at any opportunity, but Abbey's customers are not really rich enough for it.
National Australia Bank had talks with Abbey last year, to no avail, and has a British chief executive, John Stewart. He hasn't commented on Abbey, but as he's busy sorting the bank out after a financial scandal, he's unlikely to be preparing a bid.Reuse content