HBOS And Lloyds In Merger Talks

Lloyds TSB has reached a deal to merge with HBOS, Britain's biggest mortgage lender, after the latter's shares plummeted for a third day running.

Lloyds is the fifth-largest UK bank by market capitalisation and the UK's third biggest home mortgage lender. HBOS, the parent company of Halifax and the Bank of Scotland, writes about a fifth of the home mortgages in the UK.

Reports of a potential deal pushed HBOS and Lloyds shares into upwards, reversing earlier losses. HBOS shares were down as much as 47 per cent from Tuesday's close of 182 pence , but then rose to more than 20 per cent above Tuesday's close. HBOS shares closed at 730.5 pence on Jan. 2.

Lloyds shares traded in a narrower range, veering from 10 per cent below Tuesday's close of 279.75 pence to 10 per cent higher. Lloyds shares started the year at 469 pence.

Prime Minister Gordon Brown's office declined to comment on the BBC's report that he had been in touch with Lloyds TSB's chairman, Sir Victor Blank, about the deal. "The prime minister speaks to all sorts of senior businessmen and financial figures all the time," Brown's spokesman Michael Ellam told reporters.