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How did HBOS drag down Lloyds TSB?

The 2008 acquisition of HBOS by Lloyds bank was supposedly a match made in heaven and a great way to calm the concerns of investors with exposure to the UK banking sector. However today Lloyds bank stands on the verge of being taken under government control after HBOS reported a £10 billion loss. Despite concerns that the situation has changed since Lloyds bank decided to takeover HBOS, a look back in history shows that 2003 was the time when initial concerns about the corporate lending activities of HBOS came to light.

The merger of the old Halifax and Bank of Scotland banking groups was at the time welcomed by many investors although when they merged entity began to evolve there were a number of concerns. Corporate lending was the main concern of many analysts and investors although as the group continued to report better and better figures many of these concerns were played down. It is only now that the UK economy is in a serious downturn that the full extent of the risky corporate loan portfolio which HBOS created has been revealed in its full glory.

The demise of the enlarged Lloyds bank group is sure to have an impact upon the rest of the UK banking sector because despite denials by the government it would appear that nationalisation of this once proud UK institution is only a matter of days away.

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