Takeover doubts hit Lloyds TSB shares

British bank shares slumped again today as the UK stock market faced another day of sharp falls triggered by the growing world financial crisis.

Among the worst hit was Lloyds TSB, which in initial trading fell 19.95p - or more than seven per cent - to 197.3p amid continuing doubts about the viability of its recently agreed takeover of the struggling HBOS.

HBOS itself was also under pressure, dropping 13 per cent in initial trading to add to the 18 per cent fall it posted yesterday. Its share price is now 126p down on its price at the start of the week. Shares in the Royal Bank of Scotland, which fell by nearly 13 per cent yesterday, were the biggest early faller today, dropping by a further 18.2p this morning, while Barclays was also 12.75p lower following a decline of more than 32p yesterday.

HSBC, which avoided the worst of the carnage yesterday by slipping only 14p, was 7.7p down in early trading this morning and appeared to again be weathering the storm better than its rivals.

Other shares were also down, with the FTSE 100 down 105.3 to 4713.3, showing a two per cent fall in early trading and reflecting the similar falls elsewhere in the world overnight.

All the falls are being prompted by continuing fears about the banks' potential exposure to bad debts and by fears about their ability to raise money from the frozen world credit markets.

One fear now will be that depositers in the worst affected institutions will seek to withdraw their cash and place it in safer institutions, such as the Nationwide building society, or the Northern Rock, which is now underwritten by the Government.

The prospect of such mass withdrawals was one of the reasons for yesterday's fall of Bradford & Bingley because no bank can sustain the loss of large volumes of deposits given the lack of money that is available on the world financial markets to meet such demands.