Further losses suffered by HBOS totalling £2.72 billion will not stop its planned merger with Lloyds TSB, the banks insisted.

Increasingly tough conditions amid the global credit crisis have seen HBOS hit by writedowns of £5.18 billion in the first nine months of the year. Lloyds also said profits had seen a "substantial reduction" since the start of the year.

But both banks confirmed their commitment to the deal, despite speculation of a rival deal for HBOS from an unnamed foreign suitor.

Lloyds said the merger would deliver annual cost savings of more than £1.5 billion by the end of 2011, compared with its previous estimate that it would be able to save around £1 billion or 10% of the combined group's cost base.

There was no mention of impact on jobs in the two banks, with concerns growing in Scotland that the merger could see thousands of positions axed in the region.

The deal also came under pressure over the weekend after it emerged that two potential mystery bidders were considering putting in rival bids for HBOS.

The two banks are raising £17 billion in share sales underwritten by the Government, which will help fund the acquisition and boost their battered balance sheets.

Lloyds, which is raising up to £5.5 billion, showed that regulators would require it to raise a total of £7 billion if the HBOS takeover did not go ahead.

It told shareholders: "The combination of Lloyds TSB and HBOS, including the required capital raising by both companies, is in the best interests of the company and Lloyds TSB shareholders as a whole.

"The Lloyds TSB board believes the turbulence in current markets has presented a unique opportunity to pursue the acquisition, and unanimously recommends that Lloyds TSB shareholders vote in favour."

HBOS also said it "reaffirms its confidence in the substantial benefits" of the sale to Lloyds.

Trade union Unite voiced its anger that the banks failed to give any clarity on job security for staff.

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