LONDON BRIEFING:As a 'superbank' takes shape, the market is on the lookout for the next casualty of the crisis

FIRST COMES the euphoria, then the doubts set in - and the recriminations begin. As world markets swing wildly in response to America's $700 billion bailout plan, the same scenario is being played out in London over the rescue of Halifax Bank of Scotland.

Euphoria over the dramatic £12 billion bailout bid from Lloyds TSB was brief. Having halved in a matter of hours ahead of the Lloyds announcement last Wednesday, HBOS shares surged briefly, only to end the day a fifth lower than they had begun.

Prices of both companies continue to be buffeted amid the market turmoil, changing the terms of Lloyds' share swap bid for Britain's biggest mortgage lender by the minute.

Now that the immediate crisis for HBOS appears to have passed, politicians, customers, consumer groups and analysts are all voicing concerns over the deal. The biggest concern is whether it will work: the toppling of US giants from Merrill Lynch to AIG and Fannie Mae and Freddie Mac is a stark demonstration that size does not necessarily afford protection from these market conditions. So why should we assume that putting HBOS together with Lloyds TSB will do the trick this side of the Atlantic? And should we really be creating a "superbank" just as the economy slides into what threatens to be a deep recession?

The combined bank will be hugely dependent on the moribund mortgage market.

Last month, just 21,086 people took out mortgages in Britain, yet another record low.

It was a condition of the deal that Lloyds TSB/HBOS do what it can to revive first-time buyer activity by continuing to provide mortgage funds. In return for assurances that it would continue lending, the government agreed to waive competition rules to rush through the takeover. The housing market is crucial to the health of the economy but one has to query whether this is the right time to be giving encouragement to first-time buyers.

Consumers, who already loathe Britain's high street banks, have dubbed the new superbank "HLOS" and are fearful that the deal will further reduce competition.

Among the analysts, the banking team at JP Morgan are adamant that the deal is not in the best interests of shareholders. Writing in a note earlier this week, they said that while the combined entity should have significant pricing power when the deal completes, it will still be severely capital constrained and estimate that it needs to raise an extra £16 billion. Given the trouble the banks had with their cash calls earlier this year, this would be virtually impossible.

For the politicians, the deal has brought on a nasty bout of north/south loathing. The Scots fear that following the takeover, the power will be transferred to London and that the jobs axe could fall heavily in Edinburgh. In Halifax, they have similar fears.

As the wrangling over jobs, head offices and national identity continues, the market, as always, is on the lookout for the next casualty. It hasn't had to look too hard: there is now near unanimity that the company next in line to surrender its independence will be Bradford Bingley, Britain's sole remaining stand-alone mortgage lender.

BB insists that it is well capitalised and that its funding remains solid, but so did HBOS, and after the extraordinary events of the past week it seems fanciful to believe it can continue for much longer without a partner.

BB specialised in the riskier end of the mortgage market and buy-to-let loans and self-certified mortgages account for as much as 85 per cent of its loan book. Reflecting the fears that a growing proportion of those loans will turn toxic, and that funds will become increasingly hard to find, shares in the lender have slumped by 90 per cent over the past year.

Britain's City regulator, the Financial Services Authority, is known to have sounded out potential partners for BB and has drawn up contingency plans for a rescue in an attempt to avoid a re-run of the Northern Rock crisis. After its disastrous £400 million rights issue in the summer, 20 per cent of BB is already in the hands of its UK banking rivals, along with Santander, the Spanish bank which owns Abbey and has taken over Alliance Leicester. None of those has yet shown any interest in stepping in.

At last night's close of 24.75p, BB is trading at less than half its deeply discounted cash-call price. The ban imposed on short-selling may have given the lender some respite but many analysts are so convinced that BB cannot continue in its current form that they will not even give a target price for the shares. One who would slashed his figure to just 7p.

And this is the grim assessment from JP Morgan: "We do not believe that it is a viable stand-alone entity."

• Fiona Walsh writes for the Guardiannewspaper in London