Lloyds TSB and HBOS in 'merger talks'

Lloyds TSB and Halifax Bank of Scotland (HBOS) are reportedly in advanced talks for a merger.

HBOS – the UK's largest mortgage lender covering around a fifth of the market – has come under pressure this week seeing its share price fall significantly.

At 8:58 BST it was down 51.65 per cent to 94p – after falls of 20 per cent yesterday and 17 per cent on Monday.

After news of the merger broke the share price made a recovery and by 9:32 BST it was up 5.27 per cent to 191.60p.

The BBC reports Lloyds TSB is prepared to make an offer well above HBOS current depressed share value.

A spokesperson for Lloyds TSB stated: "It is our policy not to speculate on market rumours.

"If there were to be an announcement, it would be made through the appropriate channels."

HBOS has also refused to comment on the merger speculation.

Amid such pressure on the HBOS share price, the Financial Services Authority (FSA), which regulates the industry, has put out a statement saying it is satisfied HBOS is not at risk of going under.

A statement read: "Since the beginning of the current extreme difficulties in the financial markets, the FSA has worked intensively with all major UK banks to ensure they have credible capital and liquidity plans.

"We are satisfied that HBOS is a well-capitalised bank that continues to fund its business in a satisfactory way."

In June, HBOS launched a £4 billion rights issue to shore up its finances.