UPDATE 1-Lloyds TSB says 9-mth profit sharply lower

* Expects to write down further 300 million pounds in H2

* Publishes shareholder circular for HBOS bid

* Confirms offer of 0.605 Lloyds/TSB shr per HBOS shr

LONDON, Nov 3 (Reuters) - Lloyds TSB (LLOY.L), the British bank in the process of buying rival HBOS HBOS.L, said its profit for the first nine months of the year fell sharply as a result of financial market turmoil and rising bad debts.

"The impact of market dislocation, insurance related volatility and higher impairments, particularly in our corporate lending portfolios, led to a substantial reduction in statutory profit before tax in the first nine months of the year," Lloyds said in a trading statement on Monday.

The bank said it expected to write off a further 300 million pounds ($488 million) in the second half of the 2008 as a result of an increase in bad loans to businesses, and predicted a further 120 million impairment charge as a result of falling house prices.

Lloyds TSB Chief Executive Eric Daniels said the bank still expected to report a good trading performance for the year as a whole.

"Despite the extremely challenging market and economic conditions, the group remains on track to deliver a good trading performance during 2008," he said in a statement.

The bank also published a circular to shareholders, confirming its offer to pay 0.605 Lloyds TSB shares for every HBOS share as part of a government brokered takeover of its British rival.

HBOS said in a separate statement that it expected the deal to be put to its shareholders in December and complete in January 2009.

(Reporting by Myles Neligan and Paul Hoskins)