Lloyds’ deal to buy HBOS was sealed in the time it takes to sup a few cocktails with Gordon Brown. But poring through the gung-ho mortgage lender’s books took nine whole months and many thousands of man hours.

Lloyds Banking Group on Wednesday admitted it had finally completed due diligence on HBOS, after agreeing to buy it in a shotgun marriage last September.

“Nine months after agreeing to purchase HBOS, it has finally completed its review of the assets at HBOS. This means … it has completed its due diligence of HBOS,” said Hank Celenti, analyst at Royal Bank of Canada.

Investors were cheered when the bank said bad debts had peaked in the first half, after it took a knife to the value of the HBOS property portfolio. H1 bad debts jumped five-fold to 13.4 billion pounds, with 80 percent due to HBOS legacy assets.

It had taken a prudent view to impairments, it said, helping its shares jump 13 percent. But the shares are still less than half their value before the deal, which many investors said was good for HBOS investors and the broader economy, but not for Lloyds shareholders.

Lloyds CEO Eric Daniels admitted in February his bank had conducted 5,000 man hours of due diligence under the hurried deal, which was brokered by UK government, and he would typically have put in 3-5 times that if he’d had more time.

In many ways, Citigroup has been the poster child for the kind of reform lawmakers seem to be talking about when they pump up the bullhorn and turn on the state taps. Too big to fail, losing staggering amounts of money, a product of the excesses of 10 years of low interest rates, Citi’s businesses are too numerous to recount, often competing with one another for clients.

It’s so big that plans to spin off its brokerage business into a joint venture with Morgan Stanley will create the biggest brokerage in the United States. A JV, expected to be announced this week, would have an estimated value of $16 billion to $20 billion, a source said, and would have more than 23,000 financial advisers, surpassing rivals Bank of America and Wells Fargo.

There are reasons for optimism that the making of a mega-broker could mark the beginning of a huge round of long-sought consolidation in the financial sector. It would certainly mark a huge divestment for Citi’s embattled CEO, Vikram Pandit. And it also comes as signs of more asset sales poke up through the quagmire of recession. South African billionaire Johann Rupert’s investment vehicle is looking at buying Lehman Brothers’ merchant banking business.

There are also reasons to worry that taxpayers are not done footing bills. Britain has had to pump more than $25 billion into Lloyds TSB and its takeover target, HBOS, after investors turned up their noses at a rights issue. Germany pumped 10 billion euros into Commerzbank last week.

And unless the promised recovery kicks in soon, having a stake in a giant brokerage might not prove as profitable as investors hope.

In other Deals News:

* Ford Motor has had talks with potential bidders for its luxury Volvo brand, Ford Chief Executive Alan Mulally said.

* Malaysia’s national car company Proton may sell a controlling stake to a foreign carmaker, company Chairman Nadzmi Mohd Salleh told the Business Times newspaper.

* African investment bank and asset management group Imara Holdings said it had formed an alliance with Nigerian financial services firm Chapel Hill Denham to give it a foothold in Africa’s most populous nation.

(Photo: A Citibank branch sign is seen behind a road sign in central Sydney REUTERS/Tim Wimborne)

Shares of HBOS and Lloyds TSB got a boost this morning in London as it appeared Lloyds was less likely to try to renegotiate its takeover of HBOS. Standard Life Investments, a top investor in Lloyds and HBOS, supports the planned takeover under the original terms, a person close to the investment firm said, and analysts suggested political and regulatory pressure would force the deal through, despite its chunky discount to the indicated offer price.

BBC Business Editor Robert Peston writes:

So if you believe that the terms of the deal won’t and can’t be changed, the current HBOS share price is an opportunity to buy £10 notes for £6.60.

That looks too good to be true. And the normal investing rule is that if it looks too good to be true, then don’t touch it even if you’re in a radiation-proof suit.

DealZone postulated yesterday that other big deals could head the same way because of falling prices - think Bank of America’s bid for Merrill Lynch. HBOS’ and Lloyds’ share price puts that deal at a 31 percent discount to its original price tag, compared with a discount of 16 percent for the Merrill/BofA deal.

The ban on short sales in the U.S. is making it tough to gauge just how much doubt there really is about that deal, though its current discount - even after yesterday’s rally - would normally raise eyebrows. That ban is set to expire tomorrow, but can be extended if the SEC deems it necessary for a maximum of 30 days in total.

If the government sees itself as being in the business of salvaging takeovers of distressed banks, a position it bolstered by backing Citigroup’s takeover of Wachovia on Monday, might the SEC seek to keep the ban in place for more than a month?

Deals of the Day:

** Anglo-Swiss miner Xstrata Plc dropped immediate plans for a $10 billion bid for No. 3 platinum producer Lonmin Plc but set the scene for a later deal by scooping up Lonmin shares as they fell.

** Iceland’s troubled banking sector witnessed further upheaval as Straumur-Burdaras said it would pay 380 million euros ($537 million) to buy assets from Landsbanki .

** Hewlett-Packard Co has agreed to buy LeftHand Networks Inc, a network storage provider, for $360 million in cash.

** Video-game retailer GameStop said it will acquire French video-game retailer Micromania from private equity fund L Capital for $700 million, including debt, to gain a presence in France.

** Struggling Finnish technology firm Elektrobit said it had agreed to sell its WiMax baseband software assets to Nokia Siemens Networks [NSN.UL] as part of its new restructuring plan.

** Royal Dutch Shell is poised to take a large stake in its Russian partner company Sibir Energy before the end of this year, the Financial Times reported.

** British instruments and controls maker Spectris Plc is buying LDS Test & Measurement from SPX Corp for $102 million, on a debt and cash-free basis, the company said.

** Nidec Corp <6594.OS>, the world’s largest maker of tiny motors used in hard disk drives, said it would buy a majority of Fuji Electric Holdings’ <6504.T> industrial motor unit for nearly 10 billion yen ($94 million).

** Indian vaccines maker Panacea Biotec Ltd

The cheap dollar is helping to tease more investment out of a notoriously shy foreign investment pool - Japan’s insurance industry. In what would be the largest acquisition by a Japanese financial firm in the U.S., Tokio Marine said it plans to buy non-life insurer Philadelphia Consolidated Holding Corp for about $4.7 billion. Tokio Marine is Japan’s largest non-life insurer, and has offered a 73 percent premium to Philadelphia Consolidated investors. Meanwhile, Nippon Life Insurance said it would take a 5 percent stake in U.S. fund and index group Russell Investments. Over the past year, the dollar is down more than 10 percent against the yen, though it is well off lows hit in early March. Japanese insurers, which earn 80 percent of their profit at home, have long been under pressure to diversify abroad to deal with an aging population and slow growth at home.

Shares in British lender HBOS rose more than 12 percent, lifted by market talk of bid interest from Spanish rival BBVA and a broad recovery across the financial sector, traders said. Britain’s largest mortgage lender has underperformed the battered sector in the run-up to its 4 billion pound ($8 billion) rights issue, and concerns about the overhang effect have also weighed, as just 8.3 percent of the shares were taken up. A deal to take on HBOS would be a radical departure for BBVA, Spain’s second-largest bank, which has focused its expansion on emerging markets in Latin America and China and in the southern United States.

Other deals of the day:

* British energy company Centrica is doubling its interest in Belgian generation and supply company SPE SA to 51 percent for 515 million euros ($820 million), overturning a deal by France’s EDF to buy the stake.

* Brazil’s Oi Participacoes bought 947 million reais ($599 million) worth of preferential shares in Brasil Telecom as part of its takeover of the No. 3 telecommunications player, the BM&F Bovespa stock exchange said.

* Thai PTT Chemical said it had agreed to buy a 50 percent stake in a Malaysian oleochemicals firm from German chemicals maker Cognis for 104 million euros ($164 million).

* GlaxoSmithKline, the world’s second largest drugmaker, took a step into the branded generics marketplace via an alliance with South Africa’s Aspen Pharmacare Holdings.

* The head of KT Corp, South Korea’s top fixed-line and broadband firm, has said full integration with its mobile service unit KTF Co would be “desirable”, a KT spokesman said.

* China’s central government and the Shanghai city government are discussing merging Shanghai Airlines with China Eastern Airlines, major Chinese business magazine Caijing reported on its website on Wednesday.