LONDON Feb 11 Lloyds Banking Group (LLOY.L) would not have needed to take government rescue cash if it had not bought HBOS, its chief executive said on Wednesday.
Eric Daniels said the deal would prove "painful" in the short-term and the next year or two "will be incredibly tough for our shareholders as well as our customers", but it will prove to be a good strategic acquisition in the long term.
"We would not have had to take government money had we not bought HBOS," Daniels told Britain's cross-party Treasury Select Committee. [ID:nLB55301]
Lloyds agreed to buy HBOS last September in a government-brokered deal, and the enlarged group took 17 billion pounds under a government rescue plan a month later, giving the government a 43 percent stake.
Some 11.5 billion pounds ($16.57 billion) of the capital was allocated to HBOS and 5.5 billion pounds was for Lloyds.
But Daniels said Lloyds only took the taxpayer money as part of the takeover. [ID:nLB364849]
The HBOS takeover has been criticised for exposing Lloyds to greater risk and eroding its capital strength.
Daniels said the bank had conducted about 5,000 man hours of due diligence under the hurried deal, and he would typically have put in 3-5 times that if able to.
But he said the "outcomes so far are within the ranges we had forecast".
He added: "We said in the short-term it would be painful, and it has proved with the deterioration in the UK economy to be a very true statement." Daniels also told staff in a letter on Wednesday that he would forgo any bonus for 2008 if offered one. In 2007 his cash bonus was 1.8 million pounds. ($1=.6941 pounds) (Reporting by Steve Slater; Editing by Mike Nesbit)