The fate of HBOS appeared to be sealed yesterday after 96 per cent of Lloyds TSB shareholders voted to buy its rival at a meeting in Glasgow.

HBOS shareholders still have to vote on the deal at their meeting on December 12 but since a high proportion of them are also Lloyds TSB investors it is probable that the HBOS board will also get the vote it needs in favour.

Both the issuance by Lloyds TSB of £5.5 billion of new preference and ordinary shares and the eventual buyback of the shares were approved with large majorities. Sir Victor Blank, the bank's chairman, said that the board hoped to complete the buyback in 2009 to allow dividend payments to resume.

The vote looked to have forced Sir Peter Burt, the former Bank of Scotland chief executive trying to keep his old bank out of Lloyds' grasp, to throw in the towel. Sir Peter said that his bid now looked “effectively improbable”.

Many small shareholders in Lloyds TSB took the opportunity of the meeting to quiz the board over the details of the takeover. They accused the directors of “buying a pig in a poke”, of “putting their head in a noose”, of creating a “disaster” and of “being on an ego trip”.

One shareholder, William James, said: “We are being told two broadly contradictory stories here today. We are being told [Lloyds TSB] is a very strong bank, doing very well and is strong enough to take over HBOS.” But the second story, he said, was that the bank was not so strong and “for some mysterious reason” needed to be propped up with government finance.

Eric Daniels, Lloyds' chief executive, reassured him: “We are an incredibly strong bank. If you look at the recapitalisation that was required, Lloyds has the least amount of new capital. We have the highest price-to-book value of any comparable bank in the UK.”

He confirmed to another questioner that HBOS needed to find funding of about £165 billion and maintained that Lloyds' strength enabled him to borrow money on the wholesale markets more cheaply than other banks.

Rejecting the idea that “nasty surprises” might be lurking on HBOS's balance sheet, he said that Lloyds had worked for 5,000 man days on the HBOS books and was convinced that the acquisition would create value for both sets of shareholders. In response to worries that it might be “a takeover too far”, he said: “That is something we spent a lot of time asking ourselves.” A deal inside the British market, he said, usually worked much better than cross-border mergers.

Sir Victor said that the vote was an “important milestone” in the history of the group, describing it as “an overwhelming endorsement for the logic of this transaction”. He added: “We do appreciate that many of our employees may feel apprehensive at this time but ... we believe the combination will generally provide enhanced opportunities for those who work in our group.”

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