Lloyds TSB, today (18 September) confirmed that it will take over struggling bank HBOS, a move that will have both short- and long-term implications for millions.

Over the past twelve months, shares in both banks have taken a nosedive, with Lloyds TSB falling by 45 per cent and HBOS down by 82 per cent.

Following the takeover, the Financial Services Authority (FSA), stated, ‘The FSA is satisfied that HBOS is a well-capitalised bank that continues to fund its business in a satisfactory way.

‘The announcement of the merger with Lloyds TSB is a welcome move as it is likely to enhance stability within financial markets and improve confidence among customers and investors in the UK financial sector.’

The alternative – the collapse of HBOS – would have left investors holding worthless shares. However, financial professionals believe that the merging of these two banking giants could affect competition.

Michelle Slade, analyst at Moneyfacts.co.uk, says, ‘As more and more companies enter into mergers, we inevitably start to worry about a lack of consumer choice. If one provider has a major hold in any aspect of a market, it results in consumers being worse off.

‘The consolidated company will have nearly 30 per cent of the UK mortgage market. Halifax and Cheltenham & Gloucester are both major and well-known brands in the UK and it is unlikely that these brands will disappear. By keeping at least the majority of the current brands, the new group will likely maintain a hold over their mortgage market share.'

But, Slade points out that when it comes to savings, products and brands could start disappearing.

She adds, ‘Cheltenham & Gloucester and Lloyds TSB do not really actively compete in the savings market and their rates are far less competitive than the HBOS brands.

‘It is therefore possible that the consolidated company will greatly reduce the number of brands and products compared to what the existing companies currently offer.’