Banking melting pot draws in TD Waterhouse customers in droves

Angus Rigby, Chief Executive Officer, TD Waterhouse comments: "In the ten years that TD Waterhouse has been operating in the UK, this has been one of the most interesting and unpredictable weeks we have seen.

Trading volumes have swollen to unprecedented levels, our customers reacting to the daily flow of incredible breaking stories from the markets. What's more, the trading activity has been played out on a global stage, with our customers making the most of our international dealing capabilities to trade stocks both in the UK and USA.

For the first and probably the last time, Lehman Brothers has entered our top ten buy trades, whilst the trades in Lehman only constitute 2.5% of the top ten buys this week, its entrance into the charts indicates that TD Waterhouse's customers, like the markets in general, did not anticipate the collapse of the fourth largest US investment bank.

"As the banking sector continues to tremble from the aftershocks of Lehman's bankruptcy filing on Monday, this week's top ten charts show a phenomenal 59.6% increase in stock bought since last week. Meanwhile this week's total buys outnumber total sells by 76%.

"With TD Waterhouse customers carefully monitoring fierce M&A activity in the sector all week, the banks naturally dominate the charts. In descending order, HBOS, RBS, Barclays and Lloyds TSB are the top four trades in both buys and sells this week. Last week's frontrunner, Lloyds TSB, has dropped to fourth position with its rumoured acquisition target, HBOS, reigning in its place. Share prices reacted dramatically on Monday following Bank of America's u-turn takeover of Merrill Lynch and this acquisition has had a rippling effect in the markets where there is speculation of an imminent take-over of the UK's largest mortgage retailer HBOS by its larger rival Lloyds TSB. Lloyds TSB, which had also considered buying Northern Rock Plc before it collapsed, is in advanced talks with HBOS to strike a deal at about 232 pence per share, which is below the 275 pence price at which HBOS sold shares as part of its failed £4 billion rights issue in July. This week, the total volume of trades in HBOS stocks alone has increased three-fold and total HBOS stocks bought this week outnumber stocks sold by a staggering 85%.

"Over the past few days, HBOS shares have taken a serious pounding, falling more than 40% on Tuesday as investors questioned the lender's ability to raise funds on the new inter-bank market rate. Lending rates have recently become more expensive because Lehman's collapse has made banks wary about lending to each other in the wholesale markets. Analysts are divided about the merits of a merger, with some arguing that it may end the crisis of confidence that is pushing up the cost of borrowing between banks and pummeling HBOS shares. Some argue that savings at HBOS should remain safe now that the state has guaranteed deposits of up to 35,000 pounds for all the bank's customers. However, other analysts claim this may not be enough to stave off panic on the street. Meanwhile, the British government is unlikely to want a second big banking failure on its hands after having to nationalize mortgage lender Northern Rock. Indeed, according to the government, HBOS, which has around 20% of the UK mortgage market, could well be seen as an even more important institution than Northern Rock.

"Finally, there has been a 60% increase in Barclays stocks bought over the week. Only days after Barclays failed to reach a deal that would have saved Lehman's, it has announced that it will now buy the broken investment firm's core capital markets businesses for $1.75 billion - far less than Lehman had hoped for. The deal is still subject to approval from the U.S. bankruptcy court for the Southern District of New York and may be terminated if not approved by regulators by next Wednesday."