Lloyds' Daniels: 'We did the country a great service' over HBOS

Lloyds chief executive Eric Daniels says the banking giant "did the country a great service" in taking over stricken lender HBOS last year.

The American, speaking after Lloyds bounced back to profit last week, says the purchase will turn out to be a good deal for the bank despite the short-term pain, the Telegraph reports.

While many Lloyds shareholders have been extremely critical of the deal, which saw the bank's share price plunge to just 19p in March last year, Daniels remains convinced the deal was the right thing to do.

"Why am I not apologising about HBOS? Because I believe this will turn out to be a very, very good deal," he says.

"I think we did the country a great service [buying HBOS] by not costing the taxpayer a bomb."

The £20bn taxpayer injection for a 40% stake in the bank is now just ahead of the breakeven point, with Lloyds' shares ending the week at 73.75p.

Daniels says he was surprised other banks did not take part in the Government's recapitalisation programme.

"At the time we understood that several banks would be in the government programme. We were given this assurance and given an assurance that the state aid requirements would not be onerous. This had been very clear," he says.

"But it turned out not to be the case. There weren't several banks and state aid turned out to be more onerous."

However, Daniels dismissed suggestions he was he misled by the Treasury and FSA.

"I wouldn't say misled. We entered into it [the recapitalisation scheme] on the understanding that there would be multibanks involved. The same assertion was made at the time of GAPS (Guaranteed Asset Protection Scheme). Things didn't turn out as they were presented," he says.

On HBOS, Daniels denies the deal was rushed through without full due-diligence.

"There wasn't pressure. There was a negotiated deal. We wanted to buy HBOS and the full board was behind it. They [the Government] knew perfectly well that if HBOS fell into the arms of the taxpayer, the value destruction would have been enormous," he says.

"We knew the quality of their loan book because they were putting up so many of their loans as their collateral. The myth about the due diligence came from the subsequent Treasury Select Committee (TSC) hearing.

"Andrew Tyrie [now chairman of the TSC] asked me a hypothetical question about what would have happened if there were not restrictions? I said we would have done three to five times more. Of course we would, but that's like asking if beer was free would you drink more? Of course you would. I would because I like beer.

"I've always been steadfast and straightforward. I will take the brickbats as well. This was my deal. If shareholders want my head, I won't shy away from my responsibilities."

Daniels also remains convinced Lloyds will not face any onerous regulatory pressure, even beyond the Coalition's Independent Commission on Banking due next summer.

"The truth is we were given reassurances that we would not be broken up in future, that this would be cleared by the Secretary of State and that we would be permitted to hang on to HBOS in return for the short-term pain that we knew we were going to take," Daniels adds.