Ex-Lloyds boss Eric Daniels defends price it paid for HBOS

The former chief executive of Lloyds has defended the price it paid for its stricken rival HBOS, denying claims he should have driven a harder bargain.

In the first account in court by a banking boss of events during the financial crisis, Eric Daniels rejected accusations that he presented Lloyds’ board with a “whitewashed” picture of the state of HBOS in September 2008.

Lloyds had to balance driving down the price to take account of HBOS’s expected multibillion-pound losses and not going so low HBOS rejected the offer or sought another buyer, he said.

Mr Daniels is being sued along with four other Lloyds directors and the bank itself by almost 6,000 shareholders on the grounds that they did not fully disclose HBOS’s parlous state. Lloyds and the directors deny the claim.

Richard Hill, QC, representing the shareholders, alleged that Lloyds agreed to pay a significant premium when its rival was in fact “worthless”.

Mr Daniels, who led Lloyds from 2003 to 2011 and during the takeover, denied that. He defended a decision to pay as much as 275p a share for HBOS during negotiations with Andy Hornby, chief executive of HBOS, on September 17. That was the price at which HBOS tried to raise funds in April 2008, with disastrous results. In the end Mr Daniels refused to pay more than 232p.

Mr Hill asked why it was still so much higher than where HBOS’s shares were trading, especially given that Mr Daniels was told the same day that HBOS would be nationalised if Lloyds could not make an offer the next morning.

Mr Daniels denied Lloyds was pressurised by the government to do the deal to stabilise the financial system.

On September 17, Sir Hector Sants, chief executive of the Financial Services Authority, phoned Mr Daniels to say how the government planned to get round the usual competition barrier.

Later that day the Treasury official Nicholas Macpherson, now Lord Macpherson of Earl’s Court, visited Linklaters, Lloyds’ lawyers, to check on progress, Mr Daniels said, but did not take part in talks with HBOS.

Mr Daniels also described the role of Matthew Greenburgh, a senior investment banker at Merrill Lynch, who advised Lloyds’ board that the HBOS deal was a “tremendous opportunity”.

The trial continues.