Lloyds TSB buys HBOS for £12bn

Lloyds TSB unveiled a mammoth £12 billion takeover of ailing Halifax Bank of Scotland today in a deal set to change the face of UK banking and cause massive job losses.

The acquisition will create a new banking giant with nearly a third of the UK mortgage market, more than £300 billion of deposits and around 3,000 branches - making it far and away Britain's biggest bank.

Chancellor Alistair Darling confirmed the Government would waive competition requirements to ensure the deal went through, saying it was needed to shore up the financial system.

The alternative was "very bleak indeed", he said.

The takeover has also been welcomed by UK financial regulators including the Bank of England, although it is still subject to shareholder approval.

Speculation that as many as 40,000 job losses could follow was described as being "on the high side" by Lloyds TSB.

HBOS employs 75,000 people and has 1,100 branches in the UK. Lloyds TSB has about 70,000 staff, with 1,900 branches.

The announcement helped the FTSE 100 Index hold firm today after it lost nine per cent over the first three days of the week. The Footsie was 54.7 points higher at 4967.1. HBOS shares rose 29 per cent to 190p.

The proposed boss of the new outfit, current Lloyds TSB chief executive Eric Daniels, said 10 per cent of the combined group's costs would be saved. Of the 40,000 job loss estimate, he said: "Undoubtedly there will be some job losses. But I don't recognise that, it seems on the high side."

Mr Daniels also rejected accusations the takeover represented a "shotgun marriage" between the firms.

The deal came as a stagnating housing market pushed mortgage lending down to its lowest level for more than three years during August, with £21.8 billion advanced during the month, 12 per cent less than during July and a 36 per cent drop compared with August last year.

By David Burrows