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MARKET COMMENT
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Carburton Street, London -- While its would-be partner Abbey National (LSE: ANL) faces up to life as a forlorn middleweight bank, Lloyds TSB (LSE: LLOY) remains a heavyweight with an acquisition hunger. Today's interim results from Lloyds TSB gave the clearest indication yet of the group's new focus -- Europe. "We have talked with our counterparts from many financial services companies, particularly in Europe...We have a great deal we can contribute to any cross-border merger or acquisition..." stated Lloyds TSB this morning. Moves abroad undoubtedly stem from the mature domestic market. While officially recognised as having an entrenched industry position, UK profit growth is lacklustre. Excluding exceptional items, pre-tax profits declined 5% to £1,908m in the latest half-year. Indeed, profits from retail banking fell 11% on higher investment costs, while mortgage profits dipped 4% in an increasingly competitive market. But Foolish long-term investors can take comfort from the 10% hike, to 10.2p, in the first-half dividend. Although Lloyds TSB remains the country's pre-eminent banker, shareholder danger lurks with any ambitious overseas plans. Numerous UK companies have been wrecked by the troubles a sizeable foreign purchase can bring. Apart from the possibility of simply buying a bad business, the risks of integration and cultural problems, or overpaying, loom large. To a certain extent, the international danger is reflected in the Lloyds TSB share price. At 683.5p, the shares stand on a forward price to earnings (P/E) ratio of 12.6 and offer a prospective dividend yield of 5%. On the yield alone, the shares look relatively good value. While Lloyds TSB should remain as a cornerstone in any blue-chip portfolio, a prospective investment requires a lot of faith in the talents of the Lloyds TSB boardroom. With Chief Executive Sir Peter Ellwood declaring that "a successful transaction can be achieved and we will pursue all opportunities with vigour", shareholders must beware of prudence succumbing to ambition. More: Lloyds TSB discussion board | Latest share price and news