A merger of HBOS and Lloyds TSB would change the face of personal banking in Britain, creating a gorilla among pygmies and eventually altering the look of the high street.

Well over half the households in Britain would have a relationship with the new superbank, which would become the biggest player in the personal savings and mortgage sectors.

Under the terms of the deal, Lord Stevenson and Andy Hornby — the HBOS chairman and chief executive — will quit, leaving their Lloyds TSB counterparts, Sir Victor Blank and Eric Daniels, to run the newly enlarged Lloyds Halifax.

Analysts said that there was a vast overlap between the two organisations. Hundreds of branches look certain to be closed, especially on the many high streets where the two organisations have competing branches. One estimate was that as many as 1,000 of the combined branch network of 3,000 could eventually be shut.

A merged organisation would be certain to seek savings in call centres and administrative centres. HBOS now has its head office is in Edinburgh; the new bank’s headquarters will be in London.

One banker familiar with mergers in the sector said that the potential for job cuts was considerable, especially in a sharp downturn. Mortgage business is running at half the levels of recent years with no likelihood of an upturn soon. “There’s massive overlap between Lloyds and HBOS,” he said. “It’s going to be unbelievably messy.”

“Potentially the deal will generate significant cost savings,” said Simon Pilkington, a banks analyst with Cazenove, who estimated that the annual £11.1 billion costs of the combined businesses could be cut by £2 billion. Mr Pilkington declined to comment further, but such an 18 per cent cost reduction could imply 25,000 job losses, which would be one of the biggest single private sector jobs culls in Britain.

HBOS employs 72,000 people while Lloyds has 70,000, in both cases almost entirely in Britain. In mergers of such similarly positioned organisations, as many as one third of the combined workforce could lose their jobs. When Royal Bank of Scotland took over National Westminster Bank in 2001, 6,800 jobs were eventually lost. There was much less overlap between branches in that case, though, because RBS operated predominantly in Scotland and NatWest in England and Wales.

Lloyds operates one of the biggest networks in the country with 1,900 branches under the Lloyds and Cheltenham & Gloucester brands. HBOS has 1,100; in many cases on the same high street.

The future of the HBOS headquarters in Edinbugh is particularly sensitive. When Halifax bought Bank of Scotland it was a condition of the deal that the centre of gravity moved from Yorkshire across the Border.

Analysts said that the combination of the country’s fourth and fifth-biggest banks will alter high street banking significantly, with the new entity becoming the market leader in current accounts, mortgages, savings, credit cards, personal loans and services to small and medium-sized businesses.

Although the combination would still be smaller by stock market value than HSBC, Barclays and Royal Bank of Scotland, it would dominate the personal banking market.

A Lloyds/HBOS combination would have a 29 per cent market share of current accounts, according to Cazenove, half as much again as the current market leader RBS. With regard to savings it would be four times bigger than any other bank, while it would be treble the size of the next biggest provider in the mortgages sector, Banco Santander of Spain, which owns Abbey.

An investigation by the Competition Commission would be almost automatic in usual circumstances, but the normal rules are to be waived on the grounds of national interest.

Property experts said that pubs, restaurants and bookmakers would be the most likely bidders for any branches put up for sale by Britain’s new banking titan. However, they added that it was one of the worst possible times to find a buyer, given the toughest trading conditions on the high street for nearly two decades.

John Hutson, chief executive of JD Wetherspoon, said that he would be interested in looking at sites if and when they come up for sale. Wetherspoon’s estate includes 50 former banks and 100 former post offices.

Mr Hutson said: “Bank branches are by and large in very good locations in the middle of the high street and they lend themselves really well to pubs. They’re beautiful old buildings, have high ceilings and they don’t have very good shopfronts for retailers. We’re definitely interested in opening new sites.”

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