Lloyds bigs up the Co-op

Lloyds logo

With 1,000 branches, 10% of all branches of UK banks, and 7% of the current account market, the enlarged Co-op should represent serious new competition to the giants of British banking.

And for the Co-op, it looks like an amazingly good deal. It is paying a maximum of £750m for 632 branches and for capital that Lloyds is bestowing on the business of £1.5bn - which means there will be a loss on the transaction of up to £750m for Lloyds.

What the Co-op will be getting is a very solid bank: £24bn of mortgages, matched to the tune of 98% by highly desirable retail deposits.

Lloyds is also underwriting the fundraising by the Co-op (the sale of perpetual subordinated debt, since you asked) to pay for the down payment of £400m. So, in effect, Lloyds is lending the Co-op the purchase price.

The Co-op's bank will operate off Lloyds' IT systems, and Lloyds is providing the senior management of the Co-op's enlarged bank.

It is hard to think of any deal in which the seller has provided quite so much help to the buyer. This transaction would be the equivalent of you selling me your house for half its value, in return for an IOU from me, whose value you would be guaranteeing - and you would be throwing in all the furniture and all your possessions (and much of your family) for nothing.

But Lloyds had no choice. It was forced by European regulators to make the divestment. And it felt there was no better deal on offer (and as a semi-nationalised bank, Lloyds' management took some comfort from the chancellor's enthusiasm for bigging up the Co-op)

There is one other thing that the Co-op is getting, and that is the TSB brand. For a few years, the branches being sold by Lloyds will be rebranded as TSB, which is one of the few banking names untainted by the financial and ethical disasters of recent times.

The idea of the rebranding is to deter 4.8 million Lloyds customers, who are being asked to transfer to the Co-op, not to leave in droves: an attempt will be made to reassure all of them that they would be leaving Lloyds for a bank, that if anything, is at least as strong as Lloyds (which may not be that hard, given all the financial, managerial and IT help that Lloyds is handing over).

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 194.

    #10 We can now see the results of Gordon Browns shotgun marriage between Lloyds and HBOS
    Verde has nothing to do with Halifax or BOS - it is a project associated with LTSB branches only!

  • rate this

    Comment number 193.

    #163. Dickydido

    Nope, the total and breakdown is as follows.

    632 branches in total = 164 C&G branches (i.e. all of them) + 185 LTSB Scotland branches (i.e. all of them) + 283 LTSB England/Wales branches (i.e. a selection of them). Voila.

  • rate this

    Comment number 192.

    Interesting last line, Stan.

    A friend clearing papers sent the Labour 2005 Manifesto in my direction. As I try to sit and read through it, I find it so chilling, so barefaced, that I have to put it down after only a couple of pages and take a while to recover.

  • rate this

    Comment number 191.

    I do not understand the people posing that the Co-op is "ripping off the tax payer". If anyone is ripping of the tax payer it is the managment of Lloyds TSB. They do not have to sell it for that price. They have agreed a deal that appears very favourable to the Co-op. That it the sellers problem, not the buyers.

  • Comment number 190.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 189.

    What is also good is that - compared to other high street banks - the co-op bank has a good reputation for customer services. That might suffer if it grows too big, of course - though that needn't necessarily happen.

    Currently, the big banks are losing customers to people like Nationwide, but now with more branches, more of these ex-big-bank customers might go in the direction of this 'TSB'.

  • rate this

    Comment number 188.

    Actually, the Co-op bank doesn't buy wholesale milk - that's the Co-op, as in the retailer which is the largest Co-op retailer but not the only one.

    However, what is good about the Co-op bank is who owns it. The customers. And that's why it's called 'co-operative' though it seems like it'll trade as TSB. The point is, like a building society, it's a 'mutual'.

  • rate this

    Comment number 187.

    well the coop arnt that friendly fair trade abroad but not to its farmers who supply it in the uk,today those of us that realise that cutting money paid to farmers to produce milk makes it impossible to continue no bussiness can lose money,farmers still have to pay utilities and feed bills which are rising,the coop has been one of the worst culprits even tescos pays more.so the coop isn't friendly

  • rate this

    Comment number 186.


    I still bet you voted for him in 1997.

    Not so long ago I was solemnly told by one of the participants that the crowd at Downing Street waiting to greet TB in 1997 was staged by New Labour.

    I replied that most people had worked that out at the time.

    Falsehood is the coin of the false. Bit like sterling really....

  • Comment number 185.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 184.

    This is simply an attempt to provide credibility by plastering the Co-Op name over the LloydsTSB logo; while retaining all that's worst about the latter, principally the management.

  • rate this

    Comment number 183.

    Is it just me or does this sound more like a merger than a takeover?

  • rate this

    Comment number 182.

    179 & 180

    Before the word `socialism' is used it must first be defined by the user.

    The problem is that people have been sold the idea of meritocracy. If you have done well it is down to your merit. It is a modern version of Original Sin in which the sinful do not prosper.

    A free and equal society in which there is no exploitation should be sufficient. One needs no more than enough.

  • rate this

    Comment number 181.

    Anyone watching "Bank Of Dave" on Channel 4?

    Epically brilliant (hope that is OK on Beeb!)

    Now THAT is how to run a bank!

  • rate this

    Comment number 180.

    C'mon bright youngsters and Oxbridge grads for whom it is not too late: we need a wholly socialist finance industry. Forget the 300K salaries & perks. Instead build a socialist financial industry that treats ruthlessly anti-social debt/risk overhangs & focuses on homes and industry.
    First socialist finance then socialised housing!
    This is what your education priviliges were for!

  • rate this

    Comment number 179.

    An excellent bank to be at the core of the wholly publicly owned WHOLE UK finance industry
    More on how grammar school Oxbridge kids take talent out of the labour movement and return as leaders bereft of socialist principles, full of arcane economic theory celebrating their own excellence and inequality:
    A brill Coop bank is just a good START. We need ALL finance organised collectively & EQUALITY

  • rate this

    Comment number 178.

    175.Doctor Bob

    The Lloyds directors could always have said no to the deal. Or at least get a tangible compensation guarantee from the government at the time. This is the least I, as a shareholder, would have expected from the multi-million-remunerated "talent" at the top. The fact Lloyds owners have done nothing about this fiasco just reflects poorly on them. Hence no pity from me.

  • rate this

    Comment number 177.

    167.Mr Right

    Ah, you mean if that all was done behind closed doors, or even better - in collusion, that would have been OK? Just because Vampire Squid did not managed to get their fee and rip both parties in the process does not mean it is wrong...

  • rate this

    Comment number 176.


    "I wouldn't say that paying more to suppliers is any guarantee of an ethical standard."

    Pretty much my point, if you consider UK taxpayers to be the suppliers in this case.

  • rate this

    Comment number 175.

    The problem with Lloyds arose with Gordon Brown conning Lloyds into buying the broken HBOS and the Lloyds board being too thick to see this

    =>Brown and Darling were panicking and didn't allow anything like enough time for Lloyds' Board to do due dilligence. Many sins of HBOS weren't actually on the balance sheets.


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