Interesting times continue – as news broke this morning over breakfast in the UK that Lloyds is in “advanced merger talks” with HBOS (Halifax Bank of Scotland). This merger will create a giant UK retail bank out of two considerable players on the UK market.

Over the last week, HBOS shares fell from 300p to about 100p this morning following speculations about HBOS’s weak balance sheet. Rumours of insufficient reserves were vehemently denied over the past few days. However, as in politics, once the loss of confidence sets in, it’s almost impossible to reverse it as everyone believes “there is something in it” and acts accordingly – to sell.

HBOS shares recovered 15% after the surprise announcement about merger talks came out this morning.

The news of the merger will be welcomed by many investors and UK consumers as many mortgages and savings are with HBOS.

More information about the merger progress is expected tomorrow.

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