HBOS: Burt and Mathewson to withdraw

In the next day or two, Sir Peter Burt and Sir George Mathewson will pull up their tent pegs and relocate themselves away from the furore over HBOS's future.

The duo of veteran Scottish bankers will announce that the barriers to keeping HBOS independent are insurmountable.

And they'll say it's the Chancellor, Alistair Darling, who has erected those insurmountable barriers.

As my note pointed out yesterday, the chancellor has raised strong doubts about whether the Treasury would provide vital new capital to an independent HBOS and he has also made it clear that the cost to HBOS of such capital (were it to be provided) would be almost prohibitively expensive.

So Burt and Mathewson - both of whom have other commercial activities to occupy themselves - can't escape the painful reality that their campaign to keep HBOS independent has become futile.

They recognise that most HBOS shareholders would take the view that voting to block the takeover against the revealed wishes of the Treasury would be an instance of turkeys clamouring for an early Xmas.

There is evidence that many (perhaps most) investment institutions support the deal. That can be deduced from the overwhelming support for the takeover shown today in a vote of Lloyds TSB's shareholders.

The reason it's possible to extrapolate from that vote is that there is an overlap of more than 50% between the institutions owning HBOS and Lloyds TSB.

So I think it is reasonable to predict that this takeover will now take place.

And it's also reasonable to predict that as and when Lloyds TSB reduces the headcount of the combined banks by 20,000 or more - as it must do because of the overlap between the operations of these two large organisations - some members of the government will not feel totally euphoric in getting what they wished for.