Lloyds shareholders launch £14 billion claim over HBOS

Lloyds shareholders launch £14 billion claim over HBOS


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A group of Lloyds shareholders has launched a £14 billion claim against the banking group saying they were not told the full extent of the financial problems at HBOS when Lloyds bought the struggling bank at the peak of the financial crisis.

Lloyds Action Now (LAN) is an association set up by shareholders for shareholders to recover investment losses as a result of the merger of Lloyds TSB Bank with HBOS.

Over the weekend, the group sent letters to the Treasury and to chief executive Eric Daniels and former chairman Sir Victor Blank claiming compensation for investors it says were lured into voting for the 2008 takeover without being told the Bank of England had made emergency loans to HBOS of around £25.4billion.

The group said: 'We now know Lloyd’s directors and advisors, the Government, the Financial Services Authority and the Bank of England (and advisors) were fully aware of the effective bankruptcy of HBoS before the merger but nevertheless promoted it.'

The group said the details of the loan were deliberately withheld from ordinary shareholders.

The group has taken legal advice from leading counsel and experts in the European Court who agree that shareholders have excellent grounds to recover their losses

LAN is one of a number of shareholder action groups promising to pursue the company and the government over the disastrous effect of the acquisition on shareholders.

LAN claims around 800,000 individual shareholders lost money as the bad loans at HBOS took their toll on Lloyd’s profits.

Shareholders have also had to forego dividend payments until 2012 as a condition of European Union approval for the deal.

The decision to buy HBOS meant Lloyds was forced to borrow from the government, giving the state a 41% stake in the bank and diluting holdings for the group's shareholders.

Eric Daniels has admitted shareholders had not been consulted before the deal was agreed, leading to calls for him to step down. In the end it was decided if a head should roll it would be the chairman's.

Daniels has repeatedly said shareholders will eventually reap the benefit of a merger that would not have been allowed under normal circumstances and the banking group reported an unexpected profit in the first three months of this year.

The government and Lloyds bosses have 90 days to respond to the 'letter of claim' sent on Friday.

Northern Rock shareholders have also been claiming compensation for their losses but independent valuer Andrew Caldwell – who will get paid £4.5 million for valuing the business – has repeatedly said the value of shares in the former Northern Rock was worthless in February 2008 when the bank was taken into state ownership.

As a result more than 100,000 small shareholders are not entitled to any compensation.

Northern Rock shareholders are now pinning their hopes on the European Court of Justice to overrule the decision.

source: citywire.co.uk