Lloyds TSB today unveiled the terms of its agreed £12.2 billion rescue of HBOS as it moved to stabilise the financial markets and help bail out Britain's banking system.

It is feared that up to 40,000 staff could be axed. Eric Daniels, Lloyds TSB's chief executive, admitted there would be job losses but said it was too early to go into detail.

Mr Daniels, who will become chief executive of the combined group, signalled a wave of cost-cutting and branch closures at both banks after stating the deal would save at least £1 billion in annual costs by 2011.

Accord, the staff union that represents 32,000 HBOS staff reacted angrily to the prospect of redundancies. It accused the Government of turning its back on thousands of bank staff, claiming that it could have provided emergency funding instead.

A spokesman said Accord had been in touch with its counterpart at Lloyds TSB and the two unions would be seeking clarity from management.

Shares in HBOS jumped 17 per cent to close at 172.6p, but Lloyds shares fell 15 per cent to 237.5p.

The merger, engineered by the Government in the face of the most difficult market conditions for a generation, will bring together household names including Bank of Scotland, Halifax and Scottish Widows.

Mr Daniels said a new name for the enlarged group was yet to be decided.

Sir Victor Blank, the Lloyds TSB chairman whose friendship with Gordon Brown, the Prime Minister, helped engineer the merger, becomes chairman of the enlarged bank.

Sir Victor admitted today that he spoke to Mr Brown on Monday. He said: "The one thing we saw from the beginning was that it was going to be very difficult for us to put together a combination which would satisfy ... a competition inquiry.

“I asked if the Government was prepared to give support in relation to competition issues. What the Prime Minister said was that the Government would do that.”

The future of Andy Hornby, the youthful chief executive of HBOS, remains unclear. He said today he looked forward to being part of the group but was given no guarantee of a seat on the board. He is thought likely to leave after the integration of the two banks is complete.

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