Lloyds TSB marked its transformation into Britain's new "super bank" today by revealing that investors had shunned its merger with HBOS and admitting it has paid £180 million to US regulators after allowing clients to sidestep US sanctions.

The UK taxpayer will now own 43.4 per cent of the merged business, which will be known as the Lloyds Banking Group, after investors bought only 0.5 per cent of shares on offer from Lloyds TSB and 0.24 per cent of stock offered by HBOS.

The share offerings by the pair were spurned because the price of the new shares had fallen well below the level at which they are trading at present.

However, the shares rose in early trading today, with Lloyds shares climbing by nearly 4 per cent to 136p and HBOS shares rising by 1 per cent to 80.8p.

The banks are expected to gain approval for the merger today as Lloyds TSB attempts to draw a line under a US investigation of its dealings with Sudanese and Iranian clients.

Lloyds TSB said that it had paid £180 million after an investigation by the US Department of Justice and the New York County District Attorney's Office which found that the bank had altered clients' details, allowing them to circumvent stringent anti-terror laws in America.

Although Lloyds said that it did not expect to have to pay any more in fines, it acknowledged that discussions with the authorities over the terms of the resolution had not yet concluded.

The infringements, which Lloyds admits took place bewteen 2001 and 2004, happened under the stewardship of Peter Ellwood and Eric Daniels, the present chief executive, who was appointed in 2003.

Maarten Van Der Bergh was chairman of the bank thoughout the most of the period, stepping down in 2006 to be replaced by Sir Victor Blank.

David Pritchard and Steve Targett both served as group executive director for Wholesale and International Banking between 2001 and 2004.

It has also emerged that nine other European banks, including Barclays and Credit Suisse, are also under investigation for allegedly changing wire transfer information that would otherwise have shown money originated from prohibited sources.

Reports suggest that US authorities suspect that some of the money transferred through the US banking system could have been use to finance Iran's nuclear and missile programmes.

Robert Morgenthau, the Manhattan district attorney, said: “There was an order for 30,000 metric tonnes of tungsten that would take care of every refrigerator in the Middle East and then some.

“It was not being purchased, we think, for domestic consumption ... Tungsten was not used for making refrigerators but for long-range missiles ... That is our supposition,” he told the Financial Times.

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