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Written by Gary Howes

Tuesday, 04 November 2008

Tuesday 4 November: Lloyds TSB in talks and hedge fund woes.

It has been revealed this morning in the Times that Lloyds TSB (LON:LlOY) is in talks with sovereign wealth funds and UK insurance groups over the possibility of selling shares in the soon to be created Lloyds Banking Group.

The deal is expected to be completed in January and the sell off would go a long way in helping to cover the new banks debt positions.

Lloyds intends to use the cash to help to redeem £4bn of expensive and 'restrictive' government preference shares in Lloyds and HBOS at the earliest opportunity in order to allow the bank’s board to keep its promise to restart dividend payments next year.

Job fears surrounding the merger are also growing as the Independent this morning reports that hundreds of branches may be closed. It is estimated that some 20,000 jobs are in jeopardy.

Lloyds TSB has termed the redundancies as 'cost-cutting synergies', something that has understandably raised the heckles of the unions.

Hedge Funds

Hedge Funds have been falling fast and hard over the past month, and this morning it has been written in the Financial Times that one of Goldman Sachs‘s flagship hedge funds, run by two of the Wall Street bank’s most talented traders, has lost close to $1bn since its launch in January.

This is further evidence of the crisis facing the industry. Goldman Sachs Investment Partners, which was hailed in January as one of the biggest hedge fund launches, raising more than $6bn, has told investors that it had lost $989m by September.

Barclays

When Barclays Bank opted out of the Government-sponsored banking bailout offer - and instead turned to the Middle East - the only question to be asked is why was it that any backlash over the move has taken so long to ferment.

The Telegraph has this morning reported that the Chief Executive of the bank, John Varley has written to all 150,000 staff in an attempt to defend the banks decision to raise £5.8bn from Abu Dhabi and Qatari investors rather than tap the Government for funds.

Varley cited the restrictive conditions set out by the Government as being the foremost reason why Barclays opted out of the deal. A Government stake could have seen shareholders not receiving dividends for up to 2 years.

Banks sparking anger

Downing Street expressed its frustration with HSBC after a bank executive travelling with Gordon Brown on his trip to the Gulf said that it would not pass on all of an expected reduction in interest rates this week. Abbey, also provoked anger by saying that it was raising the rates on its tracker deals a day before the Bank of England was expected to cut rates by at least 0.5% and possibly more reports the Times.