Lloyds bids to dismiss lawsuit over HBOS takeover

Lloyds stepped in to buy the owner of Halifax and Bank of Scotland in 2008 in a Government backed bid to rescue HBOS.

The US lawsuit accuses Lloyds, plus its former chairman Sir Victor Blank and former chief executive Eric Daniels, of making misleading statements about the quality of the HBOS acquisition.

Lloyds refused to comment on the matter yesterday, but a spokesperson said the bank considers that claims asserted by the Lloyds Action Now shareholder action group are without merit.

Lloyds added that it will robustly defend any legal action.

Lloyds Action Now represents around 4,000 UK-based investors who are putting their own case together against the bank and its former directors.

Lloyds Action Now said that if Lloyds’ motion to dismiss the original US shareholder lawsuit is rejected, it will be highly significant for UK shareholders.

Sir Victor, Mr Daniels and Lloyds itself has been named in a class action filed in New York, which claims it had a “reckless disregard for the truth”.

The bank’s board is accused of making misleading statements about the takeover, which at the time Mr Daniels called a “fantastic opportunity to create the UK’s leading financial services group and create great value for both sets of shareholders”.

Weeks later Lloyds had to turn to the state for a bailout, surrendering a 43 per cent stake in return for a £17bn injection of taxpayers’ money.

Lawyers said shareholders were not told about a deterioration in HBOS’s finances and the extent of the problem only became known when the bank posted a worse-than-expected £10bn loss in February 2009.

They said HBOS was technically insolvent within weeks of the deal being announced and was relying on funding from the Bank of England and the United States Federal Reserve Bank to stay afloat, but this information was withheld from investors.

Shares in Lloyds have fallen from about 165p just before the announcement of talks with HBOS to close at 31.3p on Friday.

The action over violations of the Exchange Act is being fronted by shareholder Albert Ross of Louisiana.