HBOS chief's e-mail in full

HBOS chief executive Andy Hornby has sent an e-mail to all of the bank's staff following last week's announcement of a takeover by Lloyds TSB. Here is the full text:

Dear colleagues,

I am writing to you on Sunday at the end of what has been an extraordinarily difficult and trying week for all of us.

We have all been through a whole series of emotions.

It's certainly been the most tiring and emotional week in my working life and I know (from the literally thousands of e-ils that I have received from you all) that you have been through just the same degree of worry and anxiety.

I know that you will all have gone home this weekend wondering what has happened and how the deal with Lloyds TSB came about.

You will naturally be concerned about your job and what happens next. I understand all these concerns.

This e-mail will be the first of a regular series of updates which I will send all HBOS colleagues over the next few weeks as we move towards the completion of the merger. I will write to you all at least weekly (and often more regularly).

The combination with Lloyds is the right thing to do

Eric Daniels, chief executive at Lloyds TSB, and I had been talking for a while about the deal.

We have always recognised the benefits of combining these two businesses with their fantastic collection of brands. Those talks really accelerated, however, after the momentous developments in the last few days as the world has experienced literally unprecedented turmoil in financial markets.

In the last two weeks, we have had news from the United States about Fannie Mae and Freddie Mac moving into state ownership, the sad demise of Lehman Brothers and Merrill Lynch being sold to Bank of America.

This week, financial stocks in the UK came under even more intense pressure and Eric and I moved quickly to complete the conversations between the two companies.

We agreed to be purchased by Lloyds TSB because it is the right thing to do. It really is as simple as that. We had reached a point where the dramatic movements in our share price (caused by the completely unprecedented market context) were raising concerns amongst our customers.

The simple truth is that I - and the rest of the HBOS board - were simply not prepared to take any risks with our great business.

Despite the fact that we are an exceptionally well capitalised and profitable bank, share price gyrations were causing too much uncertainty and it was time to act decisively to ensure the long-term stability of the business for colleagues and customers alike.

The objectives of the deal

The deal with Lloyds TSB is about two things.

Firstly, getting the best possible deal for our shareholders, including the many of you who have HBOS shares. The new company will be a financial powerhouse. HBOS shareholders will share in its success - they will own 44% of it. All of us who are shareholders will participate in the success of the business going forward.

Secondly, protecting and growing our franchise. Together with Lloyds TSB we will enjoy an extraordinarily strong position in Retail Banking, Corporate Banking and Insurance & Investment. The reality is that, as part of a bigger franchise, we will be able to grow the business more than we could have as a standalone HBOS.

It is also important to remember that Eric Daniels clearly said this week that he sees great value in our brands. There is no doubt that all of our core brands will feature prominently in the combined group's stable of household names.

Jobs

I know that many of you are naturally concerned about your job and the possible impact of the deal on you and your family. Rest assured that we will do everything we can to end the uncertainty for you as soon as we can.

Please remember though that the deal has just been announced so there is a lot of work to be done in the next few months. We will begin working through the detail with Lloyds TSB from tomorrow. I promise you that this is my top priority.

It is of course the case that the merger will inevitably lead to some job reductions. However, the majority of HBOS colleagues are likely to stay with the enlarged group, reflecting the sheer scale of our business.

Moreover, for most colleagues the impact of the merger is unlikely to be immediate as integration will take at least two to three years to complete.

Over the next few months we will have detailed dialogue with colleagues and our unions as we work through the detail.

Better communications

Last week was frustrating as we were unable to communicate as regularly as I would have liked with colleagues due to Stock Exchange regulations.

You will now receive regular e-mails from me and there will be frequent updates on groupnet to keep you up to date with developments on the Lloyds TSB merger. We will do everything in our power to keep you all informed.

The end of a long week

This has been an extraordinarily difficult week for all of us. Nevertheless, we have done the right thing.

This deal protects and enhances our business and delivers the best possible result for our shareholders. You can reassure all customers that this deal is in their best interests. We will do everything possible to provide certainty for colleagues about their position as soon as we can. But, please be patient.

We have just announced the deal and there is a lot of work to be done now. It is likely to be at least three months before the deal completes. Until then it is very much business as usual.

The best thing now is to go out there and keep delivering. This is a great company with great people. It is up to all of us to keep meeting our targets and delivering for our customers. That is what HBOS is all about. I know you will keep doing that.

Thanks to you all, again, for your continued efforts.

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