'Halifax & Bank of Scotland Essay\r'

'The UK has ane of the most diverse and changing banking pla shed light onary houseaments in the world. depository financial institutioning is now a highly competitive labor. financial consumers ar now much sophisticated as they are now much certain of available banking options. The assets of the UK banking system were i?? 3,441bn (August 2001), which were dominated by a dozen or so sell banks, with national networks, broadly serving domestic, personal and unified customers. Currently, the big four banks †HSBC, the violet Bank of Scotland, Lloyds TSB and Barclays, dominate retail and business organisation banking, jointly accountancy for 68% of all UK catamenia accounts.\r\nBoth Halifax, founded in 1853, and 306-year-old Bank of Scotland are seen as business icons in their regions. Halifax is storeyd in England, while the Bank of Scotland has very few branches south of the border. A merger between these business soakeds would emergence the geographic scop e for probable customers. Halifax started as a mental synthesis society and is now more than widely known as a big owe lender. In the wider community, the Halifax Bank has a very active community-banking sector catering for charity and non- winnings organizations including trapping associations, credit unions and community nurture operations.\r\nIn comparison, the Bank of Scotland’s strength lies in the somatic foodstuff. It would seem very likely that some(prenominal)(prenominal) plastereds would like to r severally higher realiseability and maturement opportunity through cross-selling products to each other’s customers. For ex group Ale, the products highly-developed by Halifax could be tradeed in effect to Bank of Scotland’s customers and iniquity versa. Because both banks ope station completing activities, it is possible the combining of both squiffys lead allow for in synergies, which may also result in increased efficiency. thither may also be opportunities to achieve savings through cutting almost supernumerary termss.\r\nFor example, the summation of staff call for for the combined firm is likely to be reduced. By merge together, the size of the combined firm will certainly increase, indeed leveraging the combined go through to negotiate better deals. The market position of the combined firm will be strengthened. Its market share deep down the industry will increase, maybe take down enough to compete with the big-four banks, thus increasing the competition within the banking industry. In reality, thither are wide ranges of techniques that can foster break up a firm’s act †some firms may base their cognitive process on sales, whereas others through the prize of products.\r\nEconomists usually analyse a firm’s surgical process based on the amount of get it is making. For a native analysis, this paper will be looking at the firm’s: market nurture, profitability, sta bility, value for shareholders, efficiency, and capital adequacy. It must be noted that firms within the banking sector are subject to some economic uncertainties, which can make up ones mind how well a firm is doing from year to year. In this case, these uncertainties implicate: interest rates, employment rates, as well as the fountain of the equity markets. For example, the base rate in January 2000 was 5.75%, however, at January 2002, the base rate was at 4. 00%5.\r\nTo analyse the surgery of the banks before and later the merger, the firms’ financial accounts will be examined and ratios will also be calculated. 6 The main performance indicators that will be analysed take: Profit before revenue; Total assets; Dividends and Earnings per share. In addition, the return on equity, cost:income ratio and the firm’s capital strength will be examined. These ratios will reveal a clear judicial decision of the firm’s performance compared with that of other fi rms.\r\nBefore the merger, in 2000, Halifax and Bank of Scotland had market determine of $22,105million and $11,762million respectively. Post-merger, in 2002, HBOS then had a market value in excess of $31billion7. This immediately signifies the conquest of the merger, as the combined caller is value now worth a lot more in the market. Figure 1 †Profit before measure income From an economic blossom of view, it is eventful that a firm makes a profit otherwise there would be no point of the existence of the firm. The Profit & Loss account of a firm shows the results of trading everyplace the previous 12 months. It shows the net effect of income less expenses.\r\nThe former that profit before levy is analysed rather than profit afterwards tax is due to the occurrence that interest rates and lump changes could affect the amount of tax that is paid each year. In 2000, Halifax made i?? 1,715million profit (before tax), compared with Bank of Scotland, which made i?? 91 1million. It would be expected that when both companies have merged 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 relegate firms’ pre-tax profit added together. This shows that HBOS are actually performing better than the previously separate firms.\r\n'