Lloyds TSB shareholders have voted to back the bank's proposed takeover of ailing rival Halifax Bank of Scotland (HBOS).

The shareholders voted 95.98 per cent in favour of the controversial deal at the Lloyds TSB Group general meeting in Glasgow.

They also backed plans to raise a total of £5.5 billion through the issue of new shares and special preference shares to strengthen Lloyds' balance sheet.

If the merger gets the go-ahead, it will create a banking giant with around 145,000 staff and 3,000 branches across the UK.

The vote was comprised of the electronic ballots from the majority of the 401 shareholders at the meeting. This was added to those who cast their vote by proxy.

Paper votes on the eight resolutions, all of which were approved, are being counted and the full results of the polls will be announced to the Stock Exchange later.

Lloyds TSB chairman Sir Victor Blank said the result of the vote was an "important milestone" in the history of the company.

"This is an overwhelming endorsement for the logic of this transaction," he added.

It comes after Chancellor Alistair Darling on Tuesday issued a warning to shareholders to approve the merger and a share-placing underwritten with public funds.

He said a public bailout would be far more costly if they rejected the current deal.

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