Lloyds TSB has reached an agreement to acquire HBOS in a deal worth £12.2 billion.

The boards of both firms believe that the acquisition is "compelling" and that it will benefit both customers and shareholders.

As part of the deal, HBOS shareholders will be given 0.83 Lloyds TSB shares for every one HBOS share.

Sir Victor Blank, chairman of Lloyds TSB, stated: "This will be a unique opportunity to accelerate and extend our strategy and create the UK's leading financial services group."

Chairman of HBOS Dennis Stevenson claimed it is the "right" decision and that the group will be one of the top players in the financial services sector in the UK.

Approval from Lloyds TSB and HBOS shareholders is still required for the deal to go through, but Mr Stevenson has recommended that they agree to the proposal.

HBOS and Lloyds TSB control six major mortgage brands, including Lloyds, Cheltenham & Gloucester, Halifax, Bank of Scotland, BM Solutions and Intelligent Finance.