Lloyds TSB has denied market rumours the deal to buy Halifax Bank of Scotland (HBOS) could be in danger, as the HBOS share price falls.

At 15:11 BST the HBOS share price had fallen 10.35 per cent amid rumours Lloyds TSB was intending to renegotiate its deal to buy the bank.

The deal originally valued HBOS at 187p a share – although the HBOS shareholders would only receive 0.843 Lloyds TSB shares for each HBOS share.

However, the current share price is 127.90p – as the banking sector takes a hit over delays to the US $700 billion financial bail out deal.

At 15:17 BST the Lloyds TSB share price was up 5.18 per cent to 228.50p.

Lloyds TSB meanwhile has denied the suggestions.

A Lloyds TSB spokesperson said: “We are going ahead with the deal. Joining with HBOS remains a fantastic opportunity.”

He explained teams at Lloyds TSB were already working behind the scenes on the structural side of the merger and were doing so from day one and hit out at unhelpful media reports.

Yesterday JP Morgan Cazenove called on Lloyds TSB to put a rights issue in place ahead of the merger to strengthen its balance sheet.

Analysts drew parallels between Lloyds TSB and Fortis – which has fallen back on state cash injections from the governments of Belgium, Luxembourg and the Netherlands in exchange for a 49 per cent stake after the European bank overextended itself with the takeover of ABN Amro.