Lloyds TSB has confirmed its takeover of HBOS to become the UK’s largest bank, in a deal it described as a “unique opportunity”. The deal values shares in Halifax Bank of Scotland at 232p each, and could lead to cost savings of £1bn a year.

Lloyds confirmed the speculation that jobs would be lost as a result of the merger, but played down the claims that 40,000 staff would face the chop.

The government featured heavily in the talks between the companies yesterday. Chancellor Alistair Darling said that the government was in support of the deal, as financial stability “must trump” competition fears.

The chancellor added that without the deal the outlook was “very bleak indeed”, and denied that the authorities had rushed through the deal.

“We were onto their [HBOS's] problem for several weeks. It didn’t just suddenly happen,” he told the BBC.

The buyout is more of a rescue package for HBOS as the company’s shares dropped dramatically in recent days, amid concerns for it future.

Lloyds said that the new bank would continue to use HBOS’s headquarters in Scotland and would focus on keeping jobs there.

Under the terms of the deal, HBOS shareholders will receive 0.83 Lloyds shares for every HBOS share.

“This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group,” said Lloyds chairman Sir Victor Blank.

Lloyds chief Eric Daniels was keen to point out that the takeover was not forced upon HBOS.

“There shouldn’t be any impression this is a shotgun marriage or a forced marriage, this is something that’s been looked at for a good long while,” he told reporters.

Lloyds added that their takeover was part of its strategy to build “the UK’s leading finance company”, adding that it also intends to increase the number of competitive mortgages on offer for first-time buyers.

The merger now means that Lloyds holds a third of the UK mortgage market, but competition watchdogs will not block the deal as it was supported by the government.

Following the takeover, Lloyds chief executive Eric Daniels will assume responsibility of the company, however the future of HBOS chief Andy Hornby is unclear.

Lloyds said that the group would continue to use The Mound – HBOS’s corporate headquarters – in Scotland, continue to hold annual general meetings in Scotland and carry on printing Bank of Scotland notes. Newspaper reports have claimed that as many as 40,000 jobs could be lost from the banks’ combined 145,000 workforce.

“In addition the management’s focus is to keep jobs in Scotland,” it added.

According to the deal agreement “significant cost savings can be made by combining the networks and back offices of Lloyds TSB and HBOS”.

Also included in the cost cutting package is the “elimination of branch duplication” in the retail arm – HBOS currently has 1,100 branches, and Lloyds TSB 1,900.

Head office posts, human resources and finance and legal departments are also likely to face “consolidation”.

HBOS chairman Dennis Stevenson believes that, “This is the right transaction for HBOS and its shareholders,

“Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.

“In addition, the combined group will have excellent brands and a very powerful franchise,” he added.

The Financial Services Authority (FSA) agreed the merger was a good thing saying it would “enhance stability within financial markets and improve confidence among customers and investors in the UK financial sector”.