Lloyds TSB shareholders have voted in favour of the proposed takeover of HBOS at its general meeting, with a "significant majority" giving their backing to the plans.
Shareholders voted 95.98% in favour of the takeover, and also passed the resolution to accept government funding as part of chancellor Alistair Darling's £37 billion banking bailout.
Eric Daniels, group chief executive of Lloyds TSB, says the move would provide "certainty for the shareholders of HBOS".
"We are very pleased to have received our shareholders' endorsement for the strategy we have set out," he adds.
Sir Victor Blank, chairman of Lloyds TSB, also said: "[This] successful vote marks another important milestone in the proposed acquisition of HBOS to create the UK's leading financial services company."
HBOS shareholders will be given the opportunity to vote on the deal next month. If they give it the green light, the takeover will go through in mid-January 2009.
As expected, protestors from the Unite union voiced their anger over the deal outside the meeting in Glasgow. They believe that the deal is likely to result in job losses from the merger of the two banks.
Despite concerns about job losses, Darling has previously warned that any attempts to change the terms of the deal could prove very costly for shareholders. It has also been claimed that HBOS will have to be nationalised if the takeover deal does not go ahead.