Mathewson-Burt plan is long on rhetoric but short on details

LONDON BRIEFING:Two Scottish banking veterans have come out of retirement to oppose Lloyds TSB's HBOS bid

IT'S HARD to think of Sir George Mathewson, former chief executive of Royal Bank of Scotland (RBS), without recalling his infamous comment on City bonuses. A payout of £750,000 (€921,000), he said, "wouldn't give you bragging power in a Soho wine bar".

His words created a furore at the time and even now, seven years later, they still have the power to shock more sensitive - and less richly remunerated - souls.

Mathewson has hit the headlines once again with his attempt to scupper the government-brokered takeover of Halifax Bank of Scotland (HBOS) by Lloyds TSB.

The retired banker has teamed up with another veteran of the banking world, Sir Peter Burt, a former Bank of Scotland (BoS) chief executive and himself no stranger to controversy.

It was Burt who, nine years ago, presided over BoS's disastrous joint venture deal in the US.

His ill-chosen partner for the bank's foray across the Atlantic was Pat Robertson, the notorious television evangelist.

Robertson's views on Scotland - "a dark land, overrun by homosexuals" - created uproar back home and ultimately forced Burt to abandon the venture.

This is the pedigree of the two 60-somethings who have appointed themselves guardians of the Scottish banking industry.

In their heyday, they prepared the ground for many of the industry's excesses and ill-fated mergers - Burt launched BoS's £21 billion bid for rival NatWest in 1999, only to be outgunned by RBS.

BoS later merged with Britain's biggest mortgage provider, Halifax, to create HBOS.

Seasoned observers of the banking sector were thus astonished last weekend when the pair emerged out of retirement, backed by a carefully orchestrated publicity campaign, as opponents of the Lloyds TSB bid for HBOS.

They were long on rhetoric: "The black horse has got two broken legs," Mathewson told reporters in a reference to Lloyds TSB's distinctive prancing horse logo, which dates back to 1677.

Details of their alternative plan were rather hard to come by, however. What is clear is that they want to be installed in the boardroom of an independent HBOS and they want the current chairman and chief executive, Lord Stevenson and Andy Hornby respectively, to be sacked. The details thereafter are distinctly fuzzy.

The HBOS board lost little time in dismissing the plan, saying it offers nothing to HBOS shareholders. There is, after all, no money on the table from the two, merely some vague suggestion that overseas investors would be tapped for funds.

While some institutional shareholders have agreed to give the two bankers a hearing, most have ridiculed their manoeuvre as a joke. One described it as "little more than a hostile job application".

Heavy job losses are expected to result from the Lloyds TSB takeover of HBOS, particularly in Scotland. But even the unions have come out firmly against the Mathewson-Burt combo, saying yesterday they had "serious doubts" about the motives of the two bankers. Their attempt to derail the agreed Lloyds TSB offer was, the Unite union said, "irresponsible".

It recalled the axing of 18,000 jobs at RBS, a bloody era presided over by Mathewson. Neither could he distance himself from the excesses of his successor at RBS, Sir Fred "the Shred" Goodwin.

Likewise Burt, the architect of the original Halifax deal, must bear some responsibility for the parlous state the bank finds itself in today, the union said.

Under the government's £37 billion bank bailout plan, HBOS receives an injection of £11.5 billion to bolster its balance sheet. While Burt and Mathewson maintain that an independent HBOS would not need much more than this, many analysts say it would require at least a further £5 billion if it were to go it alone.

It emerged over the weekend that Lloyds TSB has, ahead of the merger, already lent the struggling HBOS as much as £10 billion and the belief persists that Lloyds TSB has further earmarked a portion of its own £5.5 billion share of the bailout cash to pass on to HBOS.

Burt and Mathewson are now doing the rounds of those institutions that will see them in an attempt to press their case. To call an extraordinary general meeting of investors, they must persuade 10 per cent of HBOS shareholders to support them.

Failing that, they would have to win support of three-quarters of shareholders at the meeting scheduled next month to approve the deal.

They face an uphill struggle - the bid was brokered by the prime minister himself and is central to the government's bailout package.

A credible alternative to the Lloyds TSB deal might be considered - Bank of China for one is rumoured to be waiting in the wings with an offer.

The most likely outcome, however, despite the fears over reduced competition and heavy job losses, is that the Lloyds TSB takeover of HBOS will go ahead. And the two retired bankers will return to tending their gardens.

• Fiona Walsh writes for the Guardiannewspaper in London