Bidders should grab the chance
Opportunism wins. Santander might well have bought before the bottom in bidding for Alliance & Leicester, but by being first it may have won the prey while other potential bidders dithered.
Paying too much when the market is still falling is a brave strategy but better than offering too much when the market is rising from its nadir. By then – when it is obvious the all-clear has been sounded – the victim of the bid will want more and other predators will be circling.
Given that the Spanish bank is a lender in an Iberian market suffering an even greater property crisis than Britain, it deserves full marks for courage for seeking to buy a UK mortgage bank. Yes, its ownership of Abbey gives it synergies and yes, Alliance’s problems are more on the liabilities side of its balance sheet – difficulties with funding – than with the loans on the assets side, but why weren’t the UK banks bidding?
Where was Lloyds TSB with its well-capitalised and unsullied balance sheet: why are HBoS, Royal Bank of Scotland and Barclays not spending a small fraction of the billions of new cash and capital they have just raised? They remain wary when the Spanish bankers proved bold.
There are opportunities in many oversold sectors of the stock market to buy good businesses cheaply. All it takes is nerve. And if you don’t do it, your competitor might.
