A09919861/0.10/18 Sep 2008

Summary
• Lloyds TSB and HBOS announce that they have reached agreement on the terms of a
recommended acquisition by Lloyds TSB of HBOS. Under the terms of the Acquisition,
HBOS Shareholders will receive 0.83 Lloyds TSB Shares for every 1 HBOS Share. The
offer values HBOS at £12.2 billion (based on Lloyds TSB’s closing price on 17 September
2008 of 279.75 pence). Existing Lloyds TSB Shareholders will own approximately 56 per
cent. of the issued share capital of Lloyds TSB as enlarged by the Acquisition and existing
HBOS Shareholders approximately 44 per cent.

• The Boards of HBOS and Lloyds TSB believe that the Acquisition is a compelling business
combination which offers substantial benefits for shareholders and customers. The
Acquisition accelerates Lloyds TSB's stated strategic aim to build the UK's leading financial
services company by focusing on growing sustainable earnings streams, based on deep
customer relationships.

• Lloyds TSB's intention is that the combination will strengthen its ability to serve UK
customers in these difficult markets. Specifically Lloyds TSB intends that new lending by
the new combined bank for both UK mortgages and SMEs will continue at least at current
levels and will expand as market conditions improve. In addition, Lloyds TSB intends to
increase the range of products on offer on competitive terms to First Time Buyers (“FTBs”),
building on the current shared equity and shared ownership offers.

• The Enlarged Group will continue to use The Mound as its Scottish headquarters, will
continue to hold its Annual General Meeting in Scotland and will continue to print Bank of
Scotland bank notes. In addition the management focus is to keep jobs in Scotland.

• Sir Victor Blank will be Chairman and Eric Daniels will be Chief Executive of the Enlarged
Group.

• The Enlarged Group intends to operate a dividend policy which is consistent with attaining
its desired capital ratios and financing the growth of the business. In implementation of
these objectives, the Enlarged Group intends to pay the final dividend for the 2008 financial
year in shares. Thereafter the Group intends to pay a 2009 dividend based on a payout ratio
of 40 per cent. of underlying earnings and a progressive dividend policy thereafter.

• Lloyds TSB estimates that a combination with HBOS will lead to an additional contribution
to earnings before tax from cost synergies significantly in excess of £1 billion per year by
2011.

• It is expected that the Acquisition will lead to accretion in Lloyds TSB’s earnings per share
of over 20 per cent. per annum including cost synergies (before exceptional items) from
2011. This statement as to financial accretion is not intended to mean that Lloyds TSB’s
future earnings per share will necessarily exceed or match those of any prior year. These
figures are not based on HBOS estimates and have not been approved by HBOS.

• The combined group will benefit from a portfolio of strong and trusted brands including
Bank of Scotland, Halifax, C&G and Scottish Widows.

• It is intended that the Acquisition will be implemented by means of a scheme of
arrangement under sections 895 to 899 of the Companies Act. It is expected that the
Scheme Document will be posted by November 2008 and that, subject to the satisfaction, or
where relevant waiver, of all relevant conditions, the Scheme will become effective and the
Acquisition completed at the end of 2008 or early 2009.

• The Board of HBOS, in reviewing the Lloyds TSB offer, has given careful consideration to
the current market uncertainties and to their potential impact on HBOS. The directors of
HBOS, who have been so advised by Morgan Stanley and Dresdner Kleinwort, consider the
terms of the Acquisition to be fair and reasonable. In providing their advice, Morgan
Stanley and Dresdner Kleinwort have taken into account the commercial assessments of the
directors of HBOS. Accordingly, the HBOS Board intends unanimously to recommend that
HBOS Shareholders vote in favour of the Scheme.

• The Acquisition is conditional on, among other things, certain approvals by Lloyds TSB
Shareholders and HBOS Shareholders and the sanction of the Scheme by the Court. Merger
control approvals and regulatory clearances from, inter alia, the Financial Services
Authority will also need to be obtained. In order to become effective, the Scheme must be
approved by a majority in number of HBOS shareholders voting, representing three-fourths
in value of the HBOS Shares that are voted, at the Court Meeting. In addition, a special
resolution implementing the Scheme and sanctioning the related reduction of capital must
be passed by HBOS Shareholders representing 75 per cent. of the votes cast at the HBOS
Extraordinary General Meeting.