Lloyds TSB shareholders approve HBOS takeover

A new UK banking giant came a bit closer to reality yesterday after Lloyds TSB shareholders overwhelmingly voted through the company's takeover of its smaller rival HBOS, paving the way for the Government-brokered deal to complete by January.

Ninety-six percent of Lloyds shareholders approved the deal at an annual general meeting in Glasgow. The shareholders voted as an alternative proposal for HBOS shareholders from two Scottish grandees becomes less likely. There were protests outside the meeting by members of the banks' trade unions who fear the deal will lead to as many as 40,000 job cuts.

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Doubts persist as to whether the tie-up is in the best interests of consumers. Lloyds agreed to buy HBOS after its share price was ravaged by concern about its health as the credit crisis deepened. The banks are due to receive a combined £17bn under a government recapitalisation plan agreed last month.

But the Business Secretary, Lord Mandelson, had to overrule the Office of Fair Trading (OFT) as he pushed through the merger. The OFT had concluded earlier this month that the deal creates competition concerns in personal current accounts, banking services for small businesses and the mortgage market. However, Lord Mandelson let the deal through on the grounds of public interest. There now seems to be little that can stop it going through.

"We believe this transaction provides certainty for the shareholders of HBOS and they, along with the Lloyds TSB shareholders, will have the opportunity to share in the benefits that come from the combination," said Eric Daniels, Lloyds chief executive, in a statement following the meeting.

Most of the resolutions only needed majority backing, and approval of the deal had been widely expected. Mr Daniels said no decisions had been made on the scale of job cuts, and he was reviewing offshoring and outsourcing policy.

Steve Tatlow, assistant general secretary of Lloyds TSB Group Union (LTU), which represents more than 40,000 staff, urged the bank to provide a commitment to keep compulsory redundancies to a minimum and offer clarity on offshoring and severance pay policies. "You don't need all the finer details to make those sort of commitments," he told Reuters.

The merger could result in at least 20,000 job cuts and possibly 40,000 from a combined workforce of 145,000, analysts have estimated, as the combined companies chase efficiency gains. The deal is estimated to save £1.5bn a year by 2011.

The Government has warned that any renegotiation of that package would be far more costly for banks than the original terms, which prompted Sir Peter Burt, the former chief executive of Bank of Scotland – now part of HBOS – who has tried to scupper the Lloyds deal, to say a rival deal is highly unlikely. "Although ostensibly leaving the decision to shareholders, the barriers to any alternative proposal are now so great as to make any such proposal effectively improbable," he told The Scotsman.

HBOS shareholders will vote on the tie-up on 12 December.