HBOS Essay ⋆ Business Essay Examples ⋆ EssayEmpire

The HBOS group provides business, corporate, and retail banking, insurance, and investment services to 23 million customers in both the United Kingdom (UK) and internationally. While 86 percent of its profits are currently generated in the UK, the balance is provided from operations in Australia, North America, Ireland, and Europe. HBOS has the biggest private shareholder base of any UK company, and employs approximately 72,000 people. Via its 23 million retail customers, HBOS claims to have some sort of relationship with 40 percent of UK households. The company is the UK’s largest mortgage (21 percent of the market) and savings (16 percent) provider and is, additionally, a leading general insurer. It also offers both business banking and corporate finance facilities. Somewhat unusually, the company is registered in Scotland.

HBOS plc was established in 2001 from the merger of the Bank of Scotland and the Halifax to thereby become the fifth-largest financial services company in the UK. Both of the merged businesses have a significant pedigree. The Bank of Scotland was created in 1695 by an act of the Scots Parliament, making it Scotland’s oldest bank. Over the three centuries since, Bank of Scotland became significantly acquisitive, absorbing other household names such as the Union Bank of Scotland in 1955 and the British Linen Bank in 1971. Although not as old, the Halifax (which was stabled as a building society and only later became a bank) can still boast a history spanning one-and-a-half centuries from its establishment in 1853. Notable acquisitions over the years included the Leeds Permanent Building Society in 1995 and the Birmingham Midshires Building Society in 1999.

HBOS aims to “deliver a better deal” than its competitors (especially the UK’s “big four”), and its attitude toward corporate responsibility is a key element. It thus endeavors to align the interests of its customers (80 percent of the company’s small shareholders are also customers), “colleagues” (employees, in other words, a significant proportion of whom are also shareholders), and its other shareholders. Over and above the interests of these three parties, the pressing aspects of the environment (regarding such things as carbon reduction—HBOS claims these days to be carbon neutral—paper management, and water management) and the community (where the company is involved in both local and national community programs) are also recognized. Dealing fairly with suppliers is another aspect of the espoused social responsibility.

Given that HBOS’s driving philosophy is “what gets measured gets done,” it is not surprising that it has developed a set of key performance indicators (unique among British banks) to underpin its statement of business principles. These originally amounted to no less than 48 items, although recently reduced to only 28 so as to give prominence to the major issues the company faces. Other “firsts” the bank claims are publishing an annual financial inclusion report (as a direct response to stakeholder feedback), and the publishing of a target for new social banking accounts. HBOS is one of only two UK banks to receive the highest AAA rating from the Innovest Global Sustainability Review and to be included in the Global 100 Most Sustainable Corporations in the World. Other inclusions are in the 2006 Accountability Rating, Business in the Community Corporate Responsibility Index, Dow Jones Sustainability Index, FTSE4Good Index and Carbon Disclosure Project Climate Leadership Index.

There are five strands to HBOS’s strategy to create enduring value for its shareholders. Interestingly, these appear on the first page of the company’s Annual Report and Accounts, so despite the corporate responsibility “hype,” it remains clear that owners’ interests remain paramount in this business: (1) a clear focus on franchise growth across UK financial services; (2) targeted international growth to enhance earnings’ diversity; (3) cost leadership to enable competitive pricing; (4) capital discipline so as to ensure both sufficiency and value allocation; and (5) achievement, through team development, of consistent outstanding performance.

The worldwide banking crisis of 2008 affected HBOS, the UK’s biggest mortgage lender and generally considered to have consistently been at the center of the British “meltdown.” The bank’s problems can be traced back to the merger in 2001 of Bank of Scotland (reliant for wholesale funding to finance at least half its lending) and the Halifax (possessing a larger balance sheet) to increase its corporate lending. This enabled the making of huge loans to property developers in the midst of the global credit crisis, and led to record losses of £10 billion during 2008. HBOS was forced into a hastily constructed merger in October 2008 with Lloyds TSB. The merger created Lloyds Banking Group, in which the British public (courtesy of government financial injections) became a large shareholder. In 2009 fears grew that Lloyds would itself become nationalized if matters did not rapidly improve.

Bibliography:

HBOS plc, Annual Review & Summary Financial Statement (latest available), www.hbosplc.com (cited March 2009).

This example HBOS Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.