British bank HBOS announced on Wednesday that it was in advanced talks that could lead to a takeover offer by its rival Lloyds TSB in the latest sign of the crisis on global financial markets. “In the light of market speculation, the Board of HBOS plc confirms that it is in advanced talks with Lloyds TSB Group plc which may or may not lead to an offer being made for HBOS,” it said in a statement. “A further announcement will be made when appropriate.” The confirmation followed a BBC report that Lloyds TSB was in talks to take over HBOS, Britain's biggest provider of home loans. HBOS shares have fluctuated wildly this week because of fears over its financial strength in the wake of the bankruptcy of US investment banking giant Lehman Brothers. The shares plunged by about 50 percent, but then surged on the reports of takeover talks, only to ease again. Heavy losses earlier on Wednesday prompted Britain's FSA financial watchdog to issue a statement saying that the group was well-funded, in an attempt to avoid a flood of savers trying to withdraw their money. Prior to the report on the BBC website, HBOS shares had nosedived 52 percent to a low of 88 pence, as investors fretted over the state of the global banking sector despite news of a rescue for troubled US insurer AIG. However, the Lloyds TSB takeover report helped push the bank's stock back into the black, at one point rising to 220 pence. At 1045 GMT, HBOS stock was at 173 pence, a fall of 4.95 percent on the start of trading, while Lloyds TSB shares rose sharply on the takeover news, climbing 10.01 percent to 307.75 pence. The FSA said in a brief statement: “Since the beginning of the current extreme difficulties in the financial markets, the Financial Services Authority has worked intensively with all major UK banks to ensure they have credible capital and liquidity plans. “We are satisfied that HBOS is a well-capitalized bank that continues to fund its business in a satisfactory way.” The value of shares in HBOS, which was created by the merger of Bank of Scotland and Halifax in 2001, had slumped by a total of 36 percent over the course of Monday and Tuesday. But HBOS has argued this week that it is robust and able to fund itself. It has 258 billion pounds (324 billion euros, $461.5 billion) of savings and the strongest capital ratio, the most common measure of bank strength, of its domestic rivals. Lloyds TSB chairman Victor Blank is reported to have discussed the merger proposal with Prime Minister Gordon Brown, who is grappling with an almost unprecedented period of economic and financial market turmoil.
