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Lloyds and Trustee Savings Bank Merger - Case Study Example

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The author of this paper examines the merger between Lloyds Bank and the Trustee Savings Bank (TSB) in 1995 that resulted in Lloyds TSB Plc (Matthews et al, 2007, pp. 2031-2032). It also looks at the present-day circumstances and situation of Lloyds TSB…
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Download file to see previous pages Founded in 1765 as Lloyds Bank, it served as a clearing bank with the merger resulting in Lloyds TSB Plc, a retail bank which offers savings, mortgages, personal loans, credit cards and transaction accounts (Holland and Westwood, 2011, p. 54). The TSB Group (Trustee Savings Bank) resulted from the amalgamation of various trustee savings banks that occurred between 1970 and 1995 (Gardener et al, 1997, pp. 246-247). The Lloyds Bank merger with the TSB Group resulted in the formation of Lloyds TSB (Matthews et al, 2007, pp. 2033-2033). The bank has 1,300 branches which are located throughout the UK along with branches in Guernsey, the Isle of Man, Jersey and 30 other countries (Lloyds Banking Group, 2013, p. 9). In terms of size, it is the third-largest behind HSBC (1) and the Royal Bank of Scotland (2), ranking ahead of Halifax (4) and the Bank of Scotland (5), both of which are subsidiaries of the Lloyds Banking Group (Economics Help, 2013, p. 1). ‘Current account’ refers to a bank account that is non-interest bearing and where the holder can write checks based on the funds available (Zineldin, 2005, pp. 329-330). Current accounts are used by large as well as small firms, and public entities that conduct a considerable number of transaction daily, along with individual account holders (Vardhaman, 2012, p. 1). More than a convenience, current accounts provide a service that when properly managed can be marketed to lure customers or clients to a bank (Vardhaman, 2012, p. 1). Value-added services such as offering interest rates that are competitive, overdraft services with low-interest rates, and preferential offers concerning savings accounts and loans are examples of this (Vardhaman, 2012, p. 1). In the UK banking sector Lloyds TSB uses current accounts as a means to lure and retain customers by offering 5 percent credit interest on balances of £5,000 or higher (Lloyds TSB, 2008, p. 1). Lloyds is the largest mortgage lender in the UK (Finch and Mustoe, 2013, p. 1), providing over 80,000 mortgages to first time buyers in 2013 (Lloyds Banking Group, 2013, p. 2). In terms of competitiveness, the UK banking sector is dominated by five institutions, “HSBC, Barclays, Royal Bank of Scotland, Santander and Lloyds” that account for 90% of the market (BBC News, 2014, p. 1). Lloyds is the leading bank in the UK with a 16.7% market share (John Gilbert Financial Research, 2012, p. 1). The merger of Lloyds and TSB was a reverse takeover (Practical Law, 2014, p. 1). This represents when a private company, which in this case was TSB, takes over a public company (Makamson, 2010, pp. 117-118). The 5 billion pound merger in 1995 created the largest retail bank in the UK and third largest bank at the time after National Westminster Bank and Barclays (The New York Times, 1995, p. 7). The merger announcement came on the 10th of October 1995 and the transaction was completed before the end of that year (Neills et al, 2000, pp. 53). The merger resulted in 2.704 shares of the newly created bank being issued for each Lloyds’ share that was canceled as part of the transaction (Practical Law, 2014, p. 1). The reserve that was created as a result of the cancellation was capitalized and applied to pay up the new shares (Practical Law, 2014, p. 1). TSB shareholders were paid a dividend representing 68.3 pence per share as a premium (Practical Law, 2014, p. 1). The savings in consolidated operations represented $550 million a year by 1997 due to increased efficiency in operations (Barr, 1995, p. 1). ...Download file to see next pagesRead More
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