The British government will own 43 per cent of the merged banking group formed by Lloyds TSB and HBOS after private investors shunned a new share issue by the crisis-hit lenders, the banks said on Monday.
HBOS and Lloyds TSB, who will form banking giant Lloyds Banking Group, said that their shareholders had snubbed their multi-billion-pound rights issues, meaning the government had stepped in to buy the shares.
"As a result ... it is expected that on completion of the proposed acquisition of HBOS, HM Treasury will own approximately 43.4 per cent of the enlarged issued ordinary share capital of the newly named Lloyds Banking Group plc as at 19 January 2008," the two banks said.
Lloyds TSB agreed last year to buy HBOS in a deal worth STG9.8 billion ($A21.15 billion) after its target was left facing collapse owing to massive exposure to the US subprime mortgage crisis.
The new company, called Lloyds Banking Group, will begin trading next week following an expected court approval in Edinburgh.
HBOS and Lloyds have struggled to raise the new funds from shareholders to boost finances hit by the global credit crunch.
The new share offerings, or rights issues, were mostly snubbed by investors because their actual share prices have slumped dramatically since the plans were announced last October amid the global financial crisis.
The government had agreed to guarantee the share issue.
