Lloyds TSB, which yesterday agreed a £12 billion takeover of its beleaguered rival HBOS, moved to sell shares worth over £800 million this afternoon in a bid to take advantage of surging bank stocks.

Lloyds said it was immediately placing up to 5 per cent of its shares in issue. That could see up to 284 million shares placed, according to Reuters.

In late afternoon trading, Lloyds share price was up by just over 25 per cent at 298.25 p, which would see up to £843 million raised, although shares are typically sold in a placing at a slight discount.

Stock markets across the globe soared today as investors were spurred by the possibility of the biggest bailout in American history. The FTSE 100 surged by 455.2 points or 9.33 per cent to 5335.2, led by a massive rise in banking shares, which were also buoyed by the Financial Services Authority's (FSA) decision to ban short-selling.

Lloyds agreed an all-share deal to rescue HBOS on Thursday after its rival's shares were battered in the past week by fears about its funding position.

The deal will weaken Lloyds' capital position and as a result the bank’s credit ratings have been put under review for possible downgrade. It has admitted that it will have less money to pay dividends in the future.

Eric Daniels, the chief executive of Lloyds TSB who will run the combined group, said: "The recommended acquisition of HBOS by Lloyds TSB announced yesterday provides a unique opportunity to accelerate and extend our strategy and create the UK's leading financial services group. The capital being raised by today's placing will allow us to further strengthen our already robust capital ratios and support the development of our business strategies."

The placing is being managed by Citigroup and Merrill Lynch.

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