City analysts predicted yesterday that Patricia Hewitt would make a swift decision on the Lloyds TSB-Abbey National takeover after receiving the report of the Competition Commission. But most of them said the verdict was too close to call.
Ms Hewitt, the new Trade and Industry Secretary, had been expected to receive the report alongside a separate report into the small business banking sector. That led many observers to expect a verdict on Lloyds-Abbey deal to be delayed until August. However, the small business report will not be delivered for another four months, the commission said. Advisers to both companies said a decision on Lloyds-Abbey could now come within the conventional 20-day deadline that the department usually follows.
Analysts sceptical that Lloyds will ultimately receive clearance found support for their opinions in decision to extend the small business inquiry. "It's hard to see this being cleared on the grounds there's decent competition in the sector, when there's apparently a separate problem in small business banking," one analyst said.
A poll of 20 lawyers, fund managers and analysts conducted by Reuters found that 70 per cent of respondents reckoned Lloyds' bid would be thwarted. But others, including the companies' advisers, were more cautious.
Michael Lever, an analyst at HSBC, one of the few investment banks not engaged by either Lloyds or Abbey, said: "It's extremely finely balanced. I feel the market is being too pessimistic."
An adviser in the Lloyds camp said: "The market seems to believe there's a 50 per cent chance of this going through, which was the view before the merger of Halifax and Bank of Scotland made people more confident of a clearance."
Halifax and BoS have pitched their merger as the creation of a "fifth force" to increase competition against the so-called big four: Lloyds, Royal Bank of Scotland, HSBC and Barclays. Lloyds shares rallied to 772p after announcement of the deal, but have since fallen back to close at 705.5p yesterday, a fall of 9p.
The commission is expected to conclude its investigation into the small business banking market by 19 October. Last year's Cruickshank report found that the sector made excess profits of £5bn a year in small business banking.
Stephen Byers, Ms Hewitt's predecessor, cited concerns over competition in the sub-sector when he referred the Lloyds bid to the commission in February.Reuse content