HBOS has shelved plans to mount a £1.6 billion takeover of Quintain Estates & Development as continuing turmoil in credit markets claimed another high-profile deal casualty yesterday.

The shock move comes just a month after HBOS built up a near 14 per cent stake in Quintain and said that it was considering making an offer for the group, which has rights to build about 15,000 London homes in Wembley and Greenwich in London.

HBOS said via its Quill Securities subsidiary that “in response to recent press speculation . . . it has no current intention to make an offer for Quintain”.

The credit crunch has already caused other property deals to be pulled. Mitchells & Butlers, the pubs group, and Robert Tchenguiz’s R20 vehicle have postponed plans for a £4.5 billion property joint venture.

Becky Worthington, Quintain’s finance director, delivered a robust interim trading update just hours before HBOS’s announcement. The update included news that Quintain has gained an extra £187 million of borrowing headroom from changing its bank loan covenants.

Ms Worthington said: “HBOS has deep pockets but for others some large scale deals are falling out of bed at the moment over finding money.”

HBOS had until September 10 to come up with a firm offer or be forced to walk away after the Takeover Panel imposed a put-up or shut-up notice on the bank.

One deal source said that HBOS “simply did not have the time to put together a fully financed, fully diligenced offer in place. Financing was one aspect”.

It is understood that HBOS also needed to take on another equity partner before it could push forward for any offer. That proved impossible as private equity firms are struggling to obtain fresh credit lines at viable prices.

“There are capital adequacy issues surrounding these kind of deals for the bank. That’s why it likes joint venture people,” one source added.

HBOS can come back and make a bid for Quintain in six months under Takeover Panel rules, by which time credit markets may have improved.

Quintain shares fell 87p to 817p yesterday. Before HBOS’s decision to postpone its approach, Quintain had a market value of £1.2 billion. But sources said that including a takeover premium and debt deal, HBOS would have had to mount a £1.6 billion offer.

Last year HBOS joined West Coast Capital to buy McCarthy & Stone, the retirement homes builder, for £1.1 billion.

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