HBOS 'Becomes a Takeover Target'

Britain's biggest mortgage lender, HBOS, could soon be bought out by a consortium headed by investment bank JPMorgan, the Daily Telegraph reports.

The bank is thought to be currently holding talks with candidates to participate in the deal, with parties including the National Australia Bank and several private equity firms already having been contacted. Banking sources also indicated to the newspaper that Spanish financial giant Santander - which already owns Abbey and sealed a £1.25 billion deal to take over Alliance & Leicester earlier this month - will also soon enter discussions.

For its part, JPMorgan is unlikely to take over large parts of HBOS itself if the deal goes through. This is because the investment bank currently has little experience in the UK market, and also because it is still working through its acquisition of Bear Stearns, the troubled bank it took over in a discount deal this March. Instead, it seems likely that JPMorgan will take an advisory role only.

Reacting to the report to news agency Bloomberg, Singapore-based Schroders analyst Leslie Phang said: "The trend in consolidation in the financials is poised to accelerate. This is basically an environment whereby banks which have strong balance sheets and are not in need of funding [such as JPMorgan] will be interested in increasing their footprint [by making acquisitions]."

None of the banks involved have chosen to comment on the report.