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.

The deal will create a banking giant with around 145,000 staff and 3,000 branches across the UK.

The vote was comprised of the electronic vote from the majority of the 372 shareholders at today's 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.

Unions and politicians staged a protest outside the Scottish Exhibition and Conference Centre ahead of this morning's meeting.

They are worried over thousands of possible job cuts through the £1.5bn planned cost savings of a resultant takeover.

Concerns over the necessity for the merger and potential redundancies were also voiced by shareholders during the meeting, which lasted nearly three hours.

Sir Victor told shareholders the acquisition would transform the bank's position in the highly competitive UK market.

He added: "We do appreciate that many of our employees may feel apprehensive at this time but, in creating what we believe will be the UK's leading financial services company, we believe the combination will generally provide enhanced opportunities for those who work in our group."

The chairman said it was "inevitable" that there would be some rationalisation, but that employees would be consulted.

One shareholder suggested that the deal was "cooked up at a cocktail party", expressed his dismay that the Government had gone above competition rules for the proposed merger to be considered and told the meeting: "Most of us think this deal stinks."

Another said shareholders were being "robbed" and questioned if the banking system was in such dire straits, whether the merger was necessary.

Sir Victor said: "For very complex reasons originating in the United States we have had a banking system which has essentially nearly collapsed.

"The Government have had to step in in order to secure the position of banks."

He added that the current economic situation which everyone found themselves in was one of "extraordinary chaos".

"It is circumstances that are very complex and very serious and we have never seen the like of it before," he added.

Around 96% of shareholders approved plans to raise £5.5 billion through the issuing of new shares and special preference shares.

Lloyds will not be able to pay dividends as long as any of the £1 billion in preference shares held by the Government are outstanding.

Unite union national secretary Wendy Dunsmore said: "The company has said it will engage with the unions and we are calling for a meeting as soon as possible so we can get some guarantees.

"If things are done creatively there should be no voluntary redundancies.

"We see this as a train going through the track that has not stopped. This is the first hurdle and there are more hurdles to go. We will just have to wait and see what happens."

Shareholder Adrian Bark said he supported the takeover.

"It seems the best thing and I hope customers and taxpayers will be able to look back on this as a good thing," he added.

But another said: "I'm disappointed. I fear this will lead to many job losses and have a detrimental impact all round. It's the wrong decision."

Under the proposed deal, HBOS investors will receive 0.605 of a Lloyds share for every one of their own shares, in a deal valuing HBOS at £4.3 billion, based on last night's closing prices.

HBOS shareholders will vote themselves on whether to accept the deal in December, but were warned by their own chairman, Dennis Stevenson, last week of the risk of nationalisation if the takeover falls through.