Lloyds TSB acquirers HBOS the largest mortgage lender in Britain

Lloyds TSB Group Plc agreed to buy HBOS Plc for 12.2 billion pounds ($22.2 billion) after Britain's biggest mortgage lender lost half its market value in the past week, Gordon Browns government backed a deal and changed competition legislation to allow the merger. Lloyds TSB, the U.K.'s biggest provider of checking accounts, fell 3.5 percent today in London trading after saying it will pay 232 pence a share in stock for HBOS, 58 percent more than yesterday's closing price of 147.1. The combined bank will sell ``non-core'' assets, pay a second-half dividend in stock and reduce the payout ratio in 2009 to 40 percent of earnings, officials told reporters. ``This is the right transaction for HBOS and its shareholders,'' HBOS Chairman Dennis Stevenson said in the statement. ``Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players.'' The GBP/USD is currently trading at $1.8202 as of 8:42am, GMT.

Fed officials are indicating that they are prepared to take an even larger role in trying to contain the deepening financial crisis. ``It is just not credible for the Fed or the Treasury to say they won't put up'' any more money, said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut, and a former Fed economist. ``They are the big lender for anyone who runs into trouble.''

The yen fell against the dollar and the euro after the world's biggest central banks said they will act jointly to revive the financial markets. The yen dropped versus the most-traded currencies after the Federal Reserve, Bank of Japan, European Central Bank, Swiss National Bank and Bank of England said they are taking coordinated action to ease the freeze in bank lending. ``Intervention by central banks helps to reduce risk aversion and will weaken the yen in a knee-jerk reaction,'' said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi Ltd. in London. ``But we still believe it will take more to turn this market around and are bullish on the yen.'' The USD/JPY is currently trading at 105.04 as of 8:41am, GMT.

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