HBOS Case Study

The HBOS group of companies operates in the retail, business and corporate banking sectors and also deals with investments and insurance. Its portfolio includes a number of high-profile brands such as Clerical Medical and Sheila's Wheels as well as The Halifax and the Bank of Scotland, whose merger is central to its structure. It operates a strategy of using multiple brands to target a range of markets more specifically than an umbrella brand would be able.

HBOS's operations are mainly UK based, although the group has subsidiaries in Australia and Ireland: this contrasts with competitors such as Barclays and HSBC, which have a much wider global base. HBOS's Halifax and Bank of Scotland brands have particularly strong geographical links with regions of the UK: this has the advantage of engendering considerable consumer loyalty through local connections, but may compromise future expansion in markets outside the UK, although HBOS's branding expertise could enable it to develop appropriate brands and expand under their banners.

  • The HBOS group of companies has achieved massive market penetration by running similar products (for example car insurance) with different brandings side by side.
  • Their portfolio of brands enables them to target specific, smaller markets but with the resources of a large operation.
  • The established parts of the group (the Bank of Scotland has been operating for three centuries) provide a solid framework within which to develop new initiatives such as Sheila's Wheels.
  • HBOS is currently at the centre of a series of disputes regarding its future after a significant fall in its share price attributed to short-selling of its shares (speculative trading that generates profits when share prices fall).
  • The UK government is in favour of HBOS being taken over by Lloyds TSB, but there has been hostility from unions and from Scotland's First Minister, Alex Salmond, amidst claims that the bank can raise sufficient capital to remain independent.
  • HBOS's share prices continue to fluctuate, leading Lloyds to demand renegotiation of the takeover.
  • Currently, the future for HBOS is uncertain, and maintaining customer confidence is challenging.
  • Overall, consumer confidence in banks has been affected by recent events, and with HBOS featuring frequently in reports, its reputation is likely to have been damaged.
  • There are challenges beyond the current economic situation, for example fraud and identity theft, and banks need to have advanced technological capabilities to deal with these, adding to their costs.
  • The outlook for HBOS depends on whether it remains independent, is taken over by Lloyds or is taken on by the UK Government.
  • A takeover or government rescue plan would involve HBOS losing autonomy.
  • The various brands within the HBOS group are valuable, and it would be anticipated that any takeover or rescue plan would involve continuing to operate these businesses with little perceptible change to consumers.
  • Should HBOS continue independently, the UK government plans on bringing in regulations on short-selling which should help protect it against similar events in the future.