HBOS hides fear of Santander deal

This column needs to start with a reality check. HBOS, the bank formed by the merger of Halifax and Bank of Scotland, has not launched a bid for Abbey National. The only firm offer to buy the company at the time of writing is from Santander, the leading bank of Spain.

You would barely have guessed this from the press coverage. In the past couple of weeks, HBOS has had more column inches than it would probably have got had it launched an offer. And on the basis that these articles don’t just happen, there is clearly a major PR offensive under way.

Abbey is HBOS’s biggest competitor in the mortgage market, so clearly HBOS would like to buy its rival when Abbey is down on its luck and cheap. The problem is that a successful offer would give it well over 30 per cent of the mortgage market. The competition authorities might insist on so many conditions that it would undermine the business case for the offer.

This is where the PR strategy of HBOS is so clever because it has switched the debate from competition issues to the possible damage a lengthy referral might cause to the Abbey business. Most coverage has drawn a parallel with last year’s bid by Morrisons for Safeway. Morrisons has found Safeway more of a mouthful than it expected, but the PR spin blames the deterioration in the business on the year-long limbo it endured waiting for monopoly clearance.

The comparison is garbage but members of the press are lining up to fall for it. Safeway was being held together by sticking plaster before Morrisons’ bid, and retail market shares move more quickly than those in the mortgage arena. HBOS is worried that a Santander-owned Abbey would be a ferocious low-cost competitor – so it wants the business for itself. But let’s hand it to HBOS’s media strategists: that issue is just not discussed.

Anthony Hilton is City commentator on London’s Evening Standard.

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