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Lloyds TSB has renegotiated the terms of its takeover of HBOS, which had been put in doubt by the latter's plunging share price.

Following confirmation from the government of a £37 billion bailout of the two banks and RBS, Lloyds TSB announced revised takeover terms.

Under the new deal, first announced last month, investors will receive 0.605 Lloyds TSB shares for every HBOS share they hold.

If the previously-announced terms had been maintained, HBOS investors would have stood to gain 0.833 shares.

Lloyds TSB said it would raise £17 billion of capital through the government's bailout, which will see taxpayers hold a 41 per cent stake in the newly-merged bank.

HBOS chief executive Andy Hornby and chairman Dennis Stevenson are also set to stand down.

Sir Victor Blank, chairman of Lloyds TSB, said the bailout and confirmation of the merger was good news for investors and customers alike.

"Lloyds TSB's already robust financial position is further enhanced by today's capital raising which in turn allows us to drive forward with our plans to acquire HBOS," he said.

"Our trading update underlines that our core business is strong and growing. Our customers can feel confident that their money is secure. Lloyds TSB is and remains a great place to bank."