Shares in HBOS, owner of Halifax and Bank of Scotland, today rose by over 26 per cent after key shareholder, Standard Life, emerged as a backer of Lloyds TSB's £12 billion rescue of the troubled lender on previously agreed terms.

The move by Standard Life is a huge boost for the deal. Prime Minister Gordon Brown was forced to personally intervene to shore up the prospects of the bailout's success last night after shareholders in Lloyds TSB questioned the terms of the offer.

Shares in HBOS, which fell by as much as 20 per cent yesterday on investors’ fears, bounced back today, rising to 155p.

While the increase indicates confidence in the deal is gathering, HBOS stock is still worth 17.5 per cent less than the price per share that Lloyds is offering for the bank. Lloyds' share price rose by 13 per cent to 256p in early afternoon trading.

Standard Life, which holds shares in both banks, is understood to be backing the offer on two grounds. The fund manager believes that the deal makes sense as it stands on economic grounds. It is also backing the takeover in the interests of injecting stability into the UK's financial services sector.

Several big fund managers have told The Times that they are not convinced by the terms of the merger. Pressure has been growing for Lloyds TSB to attempt to re-price the offer. One investor said yesterday as HBOS shares plunged: “The market is telling you the deal will just not go ahead in its current form.”

The rising uncertainty forced the Prime Minister to take the unprecedented step of defying the markets publicly and intervening in a merger that he helped to broker.

“I am confident that the Lloyds TSB takeover of HBOS will go ahead,” he insisted. Two weeks ago he played a key role in the proposed takeover by waiving competition rules.

Lloyds is offering 0.833 shares for every HBOS share, which values the bank at 188p.

Standard Life has 3.1 per cent of HBOS and 1.4 per cent of Lloyds TSB, according to data provided by Thomson Reuters.

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