Eric Daniels is admiring the spectacular view from Archie Kane’s office on the top floor of Scottish Widows’ Edinburgh head-quarters. But as the chief executive of Lloyds TSB gazes across to Edinburgh Castle and the Firth of Forth, Widows’ boss Kane admits he’s had plenty to distract him from the sights in the last few weeks.

Indeed he has. Since Lloyds TSB and HBOS announced plans to merge in September, Kane has headed the team looking at bringing the two banks together and when it finally combines, he will head its Scottish operations.

In addition, he’s had to fend off accusations of selling Scotland short and attempts to thwart the merger plans. Tomorrow the Merger Action Group will try to persuade the Competition Appeal Tribunal that the government acted unlawfully in putting aside normal competition law.

Daniels, however, is confident the efforts by MAG will not succeed. “I am no expert but we are informed by those who are that they are pretty sure things have been done according to law and the procedures well observed.”

If he is correct, the final act will begin next Friday when HBOS shareholders meet in Birmingham. Ahead of that vote — pretty certain to back the merger — Lloyds has unveiled its plans for the multitude of brands under its new umbrella.

Bank of Scotland will be the dominant brand in Scotland with Lloyds and Halifax down south. A final decision on whether Bank of Scotland will be the corporate brand for the whole of the UK has yet to be made.

If all goes to plan, day one of the new bank will be sometime in mid-January and Daniels says customers of both banks will initially notice very little difference. Pessimists have said as many as 30,000 staff could go, but Daniels adds: “If everyone is expecting thousands of job losses, they might be disappointed. Both banks have very good track records in terms of employees. We will bring two organisations together under combined leadership but with very little change. The culture of both banks is pretty similar.”

Daniels says there will be a series of gradual changes over two to three years. “The way we look at credit, process credit and look at risk will evolve towards Lloyds’ model but there are many things that HBOS does particularly well — like managing multi-brands.”

Keeping the Bank of Scotland brand may not allay the fears of those who have been arguing that it could still survive as a stand-alone bank but Daniels is clearly angered at the suggestion the new bank will not recognise its heritage.

“The brands mean different things. Halifax tends to appeal to younger people, Lloyds to a more traditional audience and in Scotland, the Bank of Scotland is the bank,” he says.

“But Lloyds TSB is already registered as a Scottish company and some would say that since Bank of Scotland combined with Halifax to form HBOS, it has been less of an independent entity. So will this make a large difference?”

Daniels points out Lloyds’ ownership and stewardship of the Cheltenham & Gloucester brand, and cites the respect with which he feels it was done. He dismisses the notion that bringing HBOS on board might threaten Lloyds in a financial crisis not yet over.

“We are in a position to do this deal because we have a strong balance sheet and strong funding,” he says.

“We looked at three key short-term variable threats — the balance sheet, the risk of impairments and our capital ratios. We wanted to see if we could fund the balance sheet through a reasonably turbulent time and stress-tested it to see what would happen if things got even worse.

“We came to the conclusion that we can fund it very comfortably. We are taking on additional risk but we think it is very manageable.”

Daniels argues that the size of the new bank does not automatically mean less competition (He points out that in Spain there are just two big banks) and also refutes the suggestion that the focus on combining the banks gives others a chance to grab market share. “We must be centred on our staff and customers and can’t lose sight of that.”

In the next few weeks, the look of the new bank will take shape and although the main executive team announced a few weeks ago included just two people from HBOS, Daniels suggests the next level of appointments will closely reflect talent from both teams.

“It won’t be a one-sided organisation,” he says. “Our colleagues have to feel this is a good place to work. We can’t serve our customers well unless our employees feel good.”

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