UK: Lloyds sale of 600 branches to Co-op collapses
- Credit: PA
Lloyds Banking Group’s sale of more than 600 branches to the Co-operative Group has collapsed.
Part-nationalised Lloyds, which is being forced by Europe to sell the branches after its £20billion taxpayer bailout during the financial crisis, will instead pursue a stock market flotation for the division this summer.
The mutual has reportedly struggled to plug a £1bn capital gap needed to complete its takeover of the 632 Lloyds branches. The Co-op said the deal was not in its members’ best interests and blamed the weak economic outlook and heavy regulatory burdens for the decision.
Royal Bank of Scotland’s deal to sell 316 branches to Santander also fell through in October.
The Lloyds branches, known as Project Verde, will be rebranded under the TSB Bank name during the summer. Lloyds has been pursuing the alternative of an initial public offering (IPO) since cracks first started appearing in the Co-op deal.
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Lloyds chief executive Antonio Horta-Osorio said he was “disappointed” that the Co-op could not complete the purchase, which was mooted to be worth around £750million.
He added: “The TSB Bank will be an attractive retail and commercial bank that will have around 630 branches across the UK, a strong management team and will be a real challenger on the high street.”
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Customer-owned food-to-banking group The Co-operative was named preferred bidder for the branches in 2011, and planned to merge them with its network of more than 300 branches.
It beat competition from NBNK Investments, a takeover vehicle run by former Northern Rock boss Gary Hoffman.
Peter Marks, chief executive of The Co-operative Group, said: “After detailed and thorough consideration of all aspects of the Verde transaction, we have decided, at this time, that it is not in the best interests of our members to proceed with the transaction.
“Having worked closely and constructively with Lloyds we are naturally disappointed to have reached this conclusion.
“However, against the backdrop of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general, the Verde transaction would not currently deliver a suitable return for our members within a reasonable timeframe and with an acceptable level of risk.”
The Verde branches have about five million customers, an estimated 9,000 employees and a 4.3% share of the current account market
Under the current timetable agreed with the European Commission, 39% taxpayer-owned Lloyds must offload the branches by the end of the year.
Lloyds said it is making good progress with turning Verde into a standalone bank, adding it has a strong management team and has made “good progress” in creating separate IT systems and support functions.
TSB will operate as a separate business from Lloyds from the summer, but the group said there will be no direct impact on customers.
Lloyds added it will give an update on the IPO in “due course”, depending on regulatory and EC approval.