Shares in HBOS fell to a new low today after losing nearly 12 per cent as speculation gathered pace that Lloyds TSB may be forced to change the terms of its £12.2 billion rescue deal for the owner of Halifax and Bank of Scotland.

The fall in the bank’s shares to a record low of 125p follows an 18 per cent decline yesterday, and one major investor in HBOS and Lloyds TSB told Times Online: "The market is telling you the deal will just not go ahead in its current form."

Edinburgh-based HBOS was on the brink of collapse two weeks ago until Gordon Brown, the Prime Minister, personally intervened to broker a takeover by Lloyds TSB.

While people close to Lloyds said political pressure makes it extremely unlikely that the deal will fail, some shareholders in Lloyds TSB have privately expressed their concerns about the takeover, suggesting it is not a done deal.

One investor said: "There is something about this deal that has never quite hung together. It started to look potentially over-ambitious when analysts began to circulate very large numbers for the amount of additional capital that Lloyds TSB might need."

Other sources close to the bank said Lloyds' management could use the ongoing financial crisis as an excuse to renegotiate the terms of the merger, a move that could in itself destabilise the bailout.

HBOS and Lloyds face a demanding shareholder ballot in which 75 per cent of those who vote must approve the merger, although the banks will be helped by the fact that 50 per cent of shareholders own shares in both companies and so have a vested interest in approving the deal.

Shareholders in both banks are set to vote on the merger in late October or early November. Sources close to the situation insisted the banks will not be hurried into bringing the vote forward by the financial markets' turmoil.

Sources close to both banks said the Government's involvement will ensure the takeover goes ahead.

One City source said: "There are three parties to this marriage — HBOS, Lloyds and the Treasury. With the Treasury in there, there's just no way it can fail."

The Financial Services Authority is also understood to be relatively unconcerned about the deal. "Its pretty far down our list of priorities," said one source. The regulator did not call either bank yesterday or over the weekend.

City analysts said Lloyds' management could grab the chance to cut the price it will pay for HBOS.

Simon Pilkington, analyst at Cazenove, said: "There is a risk that the terms are amended. We expect that the overriding principle in deciding the terms is that Lloyds will not pay a premium to book value."

Other analysts argued the deal does not make financial sense for Lloyds. Alex Potter, a banking analyst with Collins Stewart, said: "If I was a Lloyds shareholder, I would say no."

HBOS has much greater exposure to the wholesale money markets for its funding than Lloyds, which has been the most financially cautious of the big banks. Shareholders could be worried a merged Lloyds-HBOS will be heavily exposed to further market turmoil.

Some institutional shareholders in HBOS, including Schroders Asset Management, are also understood to dislike the deal because they believe Lloyds is getting HBOS on the cheap.

Roger Lawson, a director of the UK Shareholders Association, which lobbies on behalf of retail investors, said: "Certainly HBOS shareholders are not happy about what's being offered. They'll be even angrier if Lloyds reduces its offer. It's only half the net asset value; the directors should not sell at that price."

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