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Lloyds and HBOS in merger talks

Lloyds TSB is in merger talks with the country’s biggest mortgage lender HBOS, a person familiar with the matter said on Wednesday.

News of the talks surfaced after HBOS shares were battered for a sixth consecutive day amid mounting fears about its funding position as the credit crunch has raised the cost of borrowing. The news sparked a rally in its shares. The source declined to provide details on the stage or details of the talks. Lloyds and HBOS declined to comment.

The BBC said the two banks were in “advanced” talks and under the deal HBOS shares would be valued at nearer to last week’s closing price of 300 pence than their current level. By 9:50 a.m. HBOS shares were up 6% at 191 pence, valuing the bank at £10 billion, after slumping over 50% earlier to trade at 88p. Lloyds shares were up 5.5% at 295p, valuing it almost £17 billion ($30 billion). (Reuters)