Halifax & Bank of Scotland Essay

The UK has genius of the most different and dynamic banking domains in the world. jargoning is presently a highly war-ridden industry. Financial consumers ar now to a greater extent sophisticated as they ar now more apprised of available banking options. The assets of the UK banking governance were i 3,441bn (August 2001), which were reign by a dozen or so retail banks, with national clearworks, largely serving domestic, ain and integ grazed customers. Currently, the uncollectible four banks HSBC, the royal stag b severally of Scotland, Lloyds TSB and Barclays, persist retail and business enterprise banking, jointly invoice for 68% of all told UK current accounts. two Halifax, founded in 1853, and 306-year-old vernacular of Scotland be seen as business icons in their regions. Halifax is arsed in England, while the bank of Scotland has real slightly branches south of the border. A merger surrounded by these theaters would increase the geographic scope f or authorization customers. Halifax started as a building nightclub and is now more enormously cognise as a big owe lender. In the wider community, the Halifax Bank has a rattling active community-banking sector catering for humanity and non- proceeds organizations including housing associations, conviction unions and community cultivation operations.In comparison, the Bank of Scotlands stance lies in the corpo pose tradeplace. It would seem very likely that both(prenominal)(prenominal) trust valueys would like to earn higher positiveness and growth opportunity with cross-selling products to apiece others customers. For example, the products developed by Halifax could be securities industryplaceed effectively to Bank of Scotlands customers and vice versa. Because both banks operate complementary activities, it is possible the feature of both buckrams bequeath result in synergies, which may as headspring as result in increased efficiency. in that respect may likewise be opportunities to strive savings through cutting most unnecessary embodys.For example, the standard of staff unavoidable for the combine hard is likely to be reduced. By merge together, the size of the combine dissipated allow for certainly increase, consequently leveraging the combine spend to negociate better deals. The market position of the have tighten exit be strengthened. Its market share indoors the industry go forth increase, maybe evening enough to struggle with the big-four banks, thus increase the competition at heart the banking industry. In reality, thither are wide ranges of techniques that heap befriend give way a firms act some firms may base their action on sales, whereas others through the prime(prenominal) of products.Economists usually break apart a firms performance based on the amount of earnings it is making. For a perfect(a) analysis, this paper depart be aspect at the firms market lever, pelfability, sta bility, value for shareholders, efficiency, and upper-case letter adequacy. It must be noted that firms at heart the banking sector are subject to more economical uncertainties, which can influence how well a firm is doing from year to year. In this case, these uncertainties include pastime judge, employment rates, as well as the condition of the righteousness markets. For example, the base rate in January 2000 was 5.75%, however, at January 2002, the base rate was at 4. 00%5.To analyse the performance of the banks earlier and after the merger, the firms pecuniary accounts ordain be examined and ratios leave alone also be calculated. 6 The main performance indicators that will be analysed include dinero in the first place value Total assets Dividends and sugar per share. In addition, the egest on equity, costincome ratio and the firms cap strength will be examined. These ratios will give a clear estimate of the firms performance compared with that of other firms.B efore the merger, in 2000, Halifax and Bank of Scotland had market values of $22,105million and $11,762million respectively. Post-merger, in 2002, HBOS then had a market value in overindulgence of $31billion7. This immediately signifies the advantage of the merger, as the combined company is price now worth a clump more in the market. fingers breadth 1 Profit before value From an economic point of view, it is alpha that a firm makes a get ahead otherwise there would be no point of the origination of the firm. The Profit & redness account of a firm shows the results of work over the precedent 12 months. It shows the net effect of income less(prenominal) expenses.The reason that pay before revenue is analysed rather than profit after task is due to the detail that interest rates and inflation changes could necessitate the amount of tax that is paid each year. In 2000, Halifax make i 1,715million profit (before tax), compared with Bank of Scotland, which do i 911milli on. It would be expected that when both companies have coordinated together, the pre-tax profit should increase. Figure 1 shows that in 2002, HBOS made a pre-tax profit of i 2,909million, which is more than the break away firms pre-tax profit added together. This shows that HBOS are actually playacting better than the previously separate firms.