Friday, December 12, 2008


HBOS say 98.4% voted for the takeover, comfortably above the 75% it needed for the capital raising although for the takeover it must also win support from a simple majority of shareholders as well not just weighted by their shareholdings. Before the meeting opened the bank received indications and proxies indicating it had 56% majority for a YES vote.
For an indication of how sensitive share prices are, both banks shares fell steeply, by 23% and 18%, on just over 1% of each bank's shares changing hands. The share price fell mostly in the morning even as HBOS reported it would win approval for the takeover by Lloyds TSB. Just over 1% or 3m and 80m shares of the 2 banks, enough for HBOS's price to fall 23% to £3.65bn at 67.5p per share and Lloyds TSB shares fell 18% to 129.9p. By market close the revised bid HBOS shareholders will be offered 0.605 of one Lloyds share per HBOS share is worth 78.6p. Yesterday the offer was worth 95p.
The bank's early statement was "HBOS welcomes preliminary voting indications received from HBOS shareholders ... (which) show overwhelming support for the transaction," HBOS said it would publish final voting figures before the weekend.
At around 15:30pm the general news reports confirmed that shareholders overwhelmingly agreed the takeover at the rain-sodden general meeting in Birmingham's conference centre. Voters could only agree YES or NO. But with large shareholders all in support and it seems most small shareholders too, the leafletting by UNITE trade unionists were aimed more at reminding shareholder of that there are thousands of jobs at risk.
HBOS shareholders also approve the £11.5bn taxpayer-funding. Based only on votes cast before the meeting in Birmingham, YES was supported by an 84% of individual shareholders, or 98% by the value of shares voted. This forecast was based on proxy votes received - the highest ever for an HBOS shareholder meeting - representing over 56% of the bank's issued share capital by value, but not by voting power. STV reported that all resolutions were passed by a majority of 99%? It too reported that the bank's results were a "surprise" to the City. Hardly, I should say, not a surprise to anyone ! The chairman of HBOS apologised for the bank's plight. Dennis Stevenson said the board was sorry about the crisis and he is "neither happy nor proud" - the world is in "the most pronounced financial crisis since the Great Depression" and, he said mournfully, HBOS faced conditions "frankly more difficult by the day". He added (in implied reference to MAG)"I cannot say too strongly that your board looked at every possible solution... we do not cede our independence lightly."
HBOS shareholders will have just a fifth of the new bank. Of the Government's banking rescue, Mr Stevenson said, "Overall, I applaud the intervention of the UK Government... it was the right thing to have done."
Andy Hornby, the much derided chief executive of HBOS Plc, not least for his £3,000 per day consultancy fee once the new bank forms, told the meeting that the Lloyds TSB deal was the best option for shareholders. "I would like to say sorry for the anxiety our shareholders have felt during this exceptionally challenging period for HBOS." That is the least he could say and the least to be said. He outlined three reasons why the takeover "made sense". First, shareholders will benefit from the synergy of the combined HBOS and Lloyds group. Does this also mean its dominating market share? Second, there will be greater financial stability as a result, and third, access to wider funding services would be available. This does not follow as a factor of size, but of course instantly the £10bn loan to HBOS from Lloyds and whatever other loans and obligations both ways between the banks are immediately vapourized, 'saved', internalised. He continued, "The large group expects to have excellent breadth and balance. This breadth of business is a vital attribute especially in the increasingly uncertain environment. In summary, we believe that the Lloyds acquisition will be in the best interest of our shareholders. We are proud of the heritage of our company and its individual brands.
The last 12 months have been an exceptionally difficult period for HBOS but we believe the Lloyds deal provides the best solution for the shareholders
." How often in how many banks have shareholders heard the same assurance and not trusted one word? My word is s my bond has become my word is only as good as my asset backed securities. Questioning the panel, a shareholder. Mr Peter Hapworth said he was "appalled" at how HBOS had been run in recent years. "Let's face facts, it is a bank like yours along with a number of other banks that have caused the crisis in the first place. You all went dashing for short-term gain to fulfil bonuses and salaries."
He said the banks are trying to hide behind "the crisis that they had caused... The banks have taken out money on profits which were fallacious. I cannot believe that you as chairman, the directors, non-executive directors, did not know what was going on. If you did not understand what was being passed around in parcels of debt you were not acting very well in the interests of shareholders or doing your jobs properly."
He asked the panel if the money paid in salaries and bonuses would be put back into the company? Mr Stevenson replied, "I understand why you made these observations. I do not agree with all of them, but I can understand because it has been completely horrible for shareholders not just in our banks but virtually all banks in the world and it is wholly reasonable to examine us and hold us to account for it." Hmmm, I can think of a few banks like HSBC that seem to have performed far better! Stevenson said HBOS is a business in which executives had received bonuses on "real profit"; executives had put money from bonuses back into company shares. "Our weakness has been our access to wholesale markets which is not about capital but about liquidity. It is liquidity that has been our problem not capital. I am not proud or happy to be where we are." This confirms what I and others suspected that especially when the share price is falling faster than other banks, or the accounts are suspicious, it become harder and harder to borrow from other banks at an economically efficient price. Stevenson said the board had focused on "nothing else but the best solution for the company's shareholders". Well, this was surely not so after September 16 and the firm agreement to be taken over by Lloyds TSB. All they have done since is say and do the minimum beyond defending that decision! Shareholder Mr Malcolm Cheshire asked why the name of the new group did not reflect the acquisition of HBOS, which we may surmise is a matter of pride in Yorkshire as much as in Scotland. Mr Stevenson said HBOS had no direct control over the name of the new group.
A few HBOS employees (out of only 300 attendees) may have been inside the meeting. Many employees are shareholders, but most would have voted online (assuming they understood this to be totally confidential) as I doubt they'd have got the day off to go to Birmingham? As a small shareholder with over 100 shares, according to HBOS's voting rules that counts the same as 10 million in the takeover vote, or so I'm told! And, I cannot believe HBOS employees overwhelmingly voted yes?
HBOS shareholders met in Birmingham to vote on the takeover deal with Lloyds TSB. Ahead of the meeting, Halifax Bank of Scotland said it was operating n "increasingly difficult market conditions" and bad debts were rising. What a daft statement - everyone knows that and every other bank is experiencing that too. Why say it unless you want to force the vote by another hit on shareholder value - and sure enough the totally unnecessary gloomy outlook sent HBOS shares tumbling 20% in morning trade. They may be back up by teatime, but in the meantime this gives shareholders another kicking to ensure they do what management advise them to do after the takeover deal has already been backed by Lloyds TSB shareholders, and most analysts fully expected HBOS shareholders to follow suit. In its trading update, HBOS said that bad debts and losses on assets had risen to £8bn ($11.9bn) in the first 11 months this year, up £3.2bn since end-September (only 0.5% of assets and general defaults of only 1.3%), hardly dramatic in a recession and indeed better than others - just par for the course. And why not add that as normally expected we will in time directly recover more than half of these current losses, or how about we expect recovery before end 2009, or we are at, or near bottom and from here on in the way could be up. Or, non-performing and impaired loans fall well within our expectations at this time and well within our reserves (let's not forget a £37bn drawing facility available from the Bank of England just for HBOS when needed!). Bad debts on corporate loans jumped to £3.3bn from £1.7bn. Anyway, shares in HBOS fell 17.4 pence, or 20% , to 70.2p in morning trading - how convenient. The management state, "Global market and economic conditions, UK recession and increasing unemployment will continue to present a particularly challenging operating and credit environment." Goodness me! Every statement by every bank says this. It has the same weight as "past performance is no guarantee of future performance" etc. Prof. Stephen Hawking's computerised speech machine sounds more warmly human than this! The 'spineless' management whitter on in the bank's last public outing as an independent force (no words for 313 years of history ("A friend for life"?), in fintech-speak "However, through the injection of capital and liquidity facilitated by the UK government, both currently and going forward, HBOS remains confident in its ability to navigate through this difficult period, as it becomes part of the enlarged Lloyds Banking Group," so that's alright then, another hackneyed phrasing.
I read an inspiring piece weekas ago in The Scotsman about how vital our banks are to the cultural as well as the business life of Scotland. Looking at HBOS management and their statement, who'd know? The takeover was personally brokered by the Prime Minister Gordon Brown (and LLoyds TSB Chairman Victor Blank who insisted on no referral to the Competition Commission or "no deal"). Government therefore green lighted the takeover ex-referral (officially unofficially for weeks and then finally only truly officially on 31 October) after Baron Mandelson found a moment the previous afternoon to consider the matter 'thorougly' without 'fettering' by any other decision-takers or decisions-taken, while outside his window thousands of women demonstrators called for equal pay, and bad news came in on the wire from Russia (troop movements into S.Ossietia) when he had just been 4 days in Moscow trying to mend fences and stop this kind of militarism, and then too while all the day personally answering thousands of Dail Mail readers' emails and faxes before going on to the Guildhall for speeches, including one by him, and dinner. In some interlude snatched from between all this he asked Humphrey and Bernard if all is as it should be and where do I sign? The decision had long been made for him, even specially legislated for only a week earlier. What else could he do but sign. Why bother asking any searching questions like what else could be done? Anyway, as he said, "preserving the stability of the financial system" outweighs any potential anti-competitive effects. The stability won will be the creation of a banking giant with 145,000 staff and 3,000 branches that is hopefully too big to fail once the new 30-40% of UK banking bank dispenses with somewhere between 20,000 and 40,000 diligent or at least innocent employees - all in a day's busy busy Yes, Minister world.
UNITE the giant trade union representing many or most of the 145,000 bank staff involved protested at the LLoyds TSB shareholder meeting demanding they are recognised as 'stakeholders' too and appealing to shareholders to consider more than financial consequences. Similar protests are expected in Birmingham today, but so far news of that aspect is not getting out and about? For protesting voices at the Birmingham meeting see:

No comments:

Post a Comment