Halifax Bank of Scotland led the stock market higher today amid growing confidence over its rescue takeover by Lloyds TSB.
HBOS shares fell earlier this week due to market concerns that the deal would have to be repriced to gain approval from Lloyds shareholders.
But
its shares have bounced back since Prime Minister Gordon Brown said he was "confident" of a deal and today a major shareholder in both banks said he supported the takeover on its original terms, lifting HBOS 20%.
Anthony Bolton, a fund manager at investment firm Fidelity, told the BBC's Today programme: "My personal view on this is that it will succeed and it will go through on the original terms, and I think most parties would like it to succeed on that basis.
"I think it'll be a very good thing for the banking market generally in the UK and I think the combined company will be an attractive investment."
Fidelity has a 2% stake in both Lloyds TSB and HBOS.
HBOS was the leading light in a strong session for bank stocks after the 700 billion US dollar (£396bn) rescue plan for US banks moved a step closer last night.
Banks dominated the FTSE 100 Index risers following the US Senate's approval for the bail-out package last night.
Although the deal – which involves buying toxic bad debts off struggling banks – must still be passed by the House of Representatives, the Footsie added 1.5% and moved above 5,000 for the first time since Monday.
Despite HBOS's strong gains, it is still trading at a 20% discount to the Lloyds TSB offer of 0.833% of its shares for every HBOS share – although this gap has narrowed since Tuesday.
Lloyds TSB was up 6% today, with Barclays and Royal Bank of Scotland also showing gains of 3% or more. Even news of a record annual fall in house prices from building society Nationwide failed to derail HBOS, which is Britain's biggest mortgage lender.
Growing hopes of an earlier than expected interest rate cut next week in a bid to stave off a deep and prolonged recession also put many Footsie retailers on the front foot.
Fashion chain Next gained 8% and B&Q owner Kingfisher added 5%. Marks & Spencer cheered 12% after second-quarter sales declines were not as bad as feared in the City.
In the FTSE 250, car maintenance and bicycles chain Halfords rose 9%, followed by Currys firm DSG International, which cheered more than 8%.
The full article contains 423 words and appears in The Scotsman newspaper.
