HBOS Shares Hit New Low As Lloyds TSB Deal Hits Snags

Shares in HBOS fell to a new low Tuesday as rumours began to circulate that the recent Lloyds TSB rescue deal would not go through in its current form.

HBOS shares are around 10% lower this morning after falling 18% yesterday.

Edinburgh-based HBOS was on the brink of collapse two weeks ago until Prime Minister Gordon Brown personally intervened to broker a takeover by Lloyds TSB.

One high profile investor said: "There is something about this deal that has never quite hung together. It started to look potentially over-ambitious when analysts began to circulate very large numbers for the amount of additional capital that Lloyds TSB might need."

Some analysts are suggesting that Lloyds' management could use the ongoing financial crisis, and the subsequent further demise of HBOS shares, as an excuse to renegotiate the terms of the merger.