Bank of China walks away from HBOS deal 'after Treasury cold shoulder'

A PROPOSED Bank of China bid to buy HBOS has been called off, it emerged yesterday.

The Scotsman has learnt China's second-biggest bank made initial inquiries about HBOS following the efforts of Jim Spowart, the financier and founder of Intelligent Finance, but it decided not to proceed with a bid.

Sources close to the deal have alleged that the Bank of China lost interest after being given the cold shoulder by the Treasury, which is supporting the Lloyds TSB takeover of HBOS.

However, this has been denied by Treasury officials who have claimed that their only interest is seeing a package put forward which will provide financial stability. A spokesman said: "We wouldn't stand in the way of a serious alternative bid if one came forward and we certainly haven't put anybody off.

"We just want a stability package and that is what is on the table at the moment and has been backed by both the boards of Lloyds and HBOS."

Nevertheless, concerns have been raised that alternatives to the Lloyds TSB bid, which would see the loss of many Scottish jobs and influence in Edinburgh, are being pushed aside by the UK government.

This comes on the back of serious questions about the deal being raised by The Scotsman ever since it was announced.

Scottish Liberal Democrat leader Tavish Scott said: "My deep concern is that the Prime Minister is pulling every string to stop any other rival bid. Journalists are being briefed, names are being released, bids are being discouraged.

"Vince Cable (the Lib Dem Treasury spokesman] and I asked for a level playing field. There is no such thing from the UK government."

Mr Scott, one of the first politicians to come out against the Lloyds deal, has also pointed out that there is just a month before HBOS shareholders are asked to make a decision and has called on other interested parties to come forward soon.

"With only a month to the shareholders' meeting, time is running out," he said.

Meanwhile, Osama Saeed, from the Islamic Foundation in Scotland, has spoken to interested parties in the Gulf. But he has been told that while they would like to invest in HBOS, as has happened with Barclays, their impression is that the Lloyds deal is a fait accompli.

"The situation is being watched, but the responses I've received are that while there would be interest in principle, it appears very much that this would not be welcomed either by the banks, the government, or both," he said.

The Unite union has backed the Lloyds offer as the only viable option on the table. But the SNP suggested that Unite's comments let down its members and sounded like a defence of the UK government.

In a press conference, Gordon Brown, the Prime Minister, claimed the problem was that no serious bid with funding had actually come forward, apart from Lloyds TSB.

He said: "There has been no announcement by any financial institution that it is prepared – apart from Lloyds TSB – to take on the problems as well as the opportunities of HBOS. People have got to be realistic.

"It is not going to change much if one person says he wants to, or they want to, take over a bank if they have got no money behind them."

The continued uncertainty in the markets saw banks under pressure yesterday, with Lloyds TSB down 17.8p at 177.4p. HBOS was 8.5p down at 99.2p.

Tory leader David Cameron also backed the bid and attacked the Scottish Government for holding out for an alternative.

He said: "All the evidence I have is that the best route forward is for Lloyds HBOS to go ahead.

"I do think it's important for politicians not to try and hold out false hopes, as Alex Salmond has frankly been doing in Scotland."

Scotsman opinion leads the way in fight for HBOS …

"The danger in the shotgun marriage between Lloyds TSB and HBOS is that the latter will be dismembered and the Bank of Scotland brand devalued. Yet it is still possible to revise the details of the takeover, which must, in any case, be agreed by HBOS shareholders … The takeover of HBOS has dire implications for the Scottish economy, particularly in Edinburgh."

"It is necessary to look beyond the immediate horror story. When this crisis is over, the financial system will work better if a healthy number of competitors are still standing. A stand-alone HBOS preserved in the near term could find its own feet then, or be sold to a bidder with which there is less overlap. When goals conflict, competition is the surest lodestar."

"Conceived in the crucible of the financial crisis six weeks ago, the proposed takeover of HBOS by Lloyds TSB now looks hasty, maybe even ill-judged.

"A bank with a 30 per cent share of current accounts and a similar presence in the mortgage market will be able to exert huge pricing power. Only investors can block the merger now. Rejecting the deal may lead to share price falls. But it is in the ultimate interests of consumers."