Lloyds' branch sale to Co-op falls through

 

Co-operative Group chief executive Peter Marks: "There will be other opportunities to expand our bank in the future"

The planned sale of 631 UK bank branches by Lloyds Banking Group to the Co-op group has fallen through.

The Co-op blamed the continued economic downturn and tougher regulatory environment imposed on banks.

Lloyds said it will now seek to sell the branches as a stand-alone bank through a stock market listing.

It had been hoped that the Co-op's purchase of the branches would create a bigger competitor to the main high street banks.

"I think it is very disappointing. I was really hoping this would happen," Business Secretary Vince Cable said in an interview with the BBC in Brazil.

"We do need more competition and we need more diversity in business lending, and having the Co-op, a mutual, a new player in the small business lending, would have been a big step forward."

Lloyds' chief executive Antonio Horta-Osorio agreed.

"We are disappointed that the Co-operative Group is unable to complete this transaction," he said.

The sales of the branches, known as Project Verde, was demanded by European regulators as the price for being bailed out by the UK government during the financial crisis.

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For the Co-op and the banking market, the ramifications are much more serious.”

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The Lloyds statement said: "The Co-operative Group's board has decided that they can no longer proceed with a purchase of the Verde business given their view of the impact of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general."

During the summer the branches will be branded as TSB Bank, and the group will operate as a separate business within Lloyds ahead of a sale.

The Co-op's chief executive, Peter Marks, 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.

"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 BBC's business editor, Robert Peston, said the Co-op's decision was a blow for the Treasury, which has been backing attempts to create powerful competitors to the UK's big high street banks. He said that the Co-op will now review the future of its banking business.

Labour's shadow financial secretary to the Treasury, Chris Leslie, said "his should serve as yet another warning to George Osborne that his economic plan is failing and he must urgently act to kick-start our flatlining economy".

But Mr Cable said "the Co-op were struggling to raise the necessary capital because the regulatory requirements at the moment are quite demanding for capital for new banks, and I think they just weren't able to achieve that in a way that was commercially acceptable to them"

"But the government can't intervene in the process - it was ultimately a commercial decision for them."

Challenger banks

Lloyds, which is 39%-owned by the government, had a deadline of November 2013 to complete the sale in order to meet European Commission competition rules. But there have been reports over the past few months that the Co-op was going cool on the acquisition.

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Millions of Lloyds customers face an element of uncertainty after a proposed deal to sell 631 branches to the Co-op collapsed”

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A flotation is unlikely to be possible until the second half of 2014, which would mean the UK government and Lloyds asking Brussels to extend its late 2013 deadline for the sale.

"I am hoping that the sell-off, which has to happen under European Union rules, will now proceed with another buyer," Mr Cable said.

The Co-op agreed in 2012 to buy the branches.

This involved the potential transfer of 4.6 million customers, including 3.5 million in England and Wales and the remainder in Scotland.

Customers in England and Wales had already received letters telling them of the move and giving them the option to stay with Lloyds. This information is still relevant, as customers of the branches being sold will still become customers of the new TSB Bank.

The aborted takeover would have created Britain's seventh-biggest bank with about 5% of personal current accounts and mortgage market and about 10% of the branch network.

A Treasury spokesman described the Co-op's move as "a commercial matter." However, he stressed that government remained committed to encouraging so-called "Challenger" banks to increase competition on the high street.

 

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  • rate this
    +30

    Comment number 23.

    The Financial Transaction Tax along with the increased liquidity requirements, lowered charges and repayment of mis-sold insurance policies simply means that banking is no longer the mega-profitable business that it once was. The 'smart money' is already out of UK banking and taxes are now propping up the sector. The basket, into which the UK put all of its eggs, has disintegrated.

  • rate this
    +3

    Comment number 22.

    What we really need are more local "banks" like Bank on Dave. That guy has done more for banking in a short space of time than all the big banks, regulators like the FSA and the government combined in 100 years.
    Go Dave.

  • rate this
    +2

    Comment number 21.

    Good. Simple as that

  • rate this
    +2

    Comment number 20.

    This is a big shame! The Co-op is the closest thing the UK has to an ethical bank. It could have changed the shape of British banking for the good, forever!

  • rate this
    -3

    Comment number 19.

    After many years with personal and business coop bank accounts I dumped them and moved to Barclays, I was treated like an idiot by the coop bank. They ran out of money and blamed my credit rating rather than admit they had no money to lend. I'd previously paid off several large business loans without a single late payment. Like so many banks, they're skint and won't admit it.

  • rate this
    +18

    Comment number 18.

    Let big banks fail.

  • rate this
    +11

    Comment number 17.

    What do you do in a Branch?
    This is the question the banks have to address as the cost of high street space to return on expenditure must be minimal. If we had a single high street "Bank" where you could visit, deposit our money (HaHa) and discuss bank things instead of 5 or 6 empty high street spaces, things would get cheaper.

  • rate this
    +35

    Comment number 16.

    I call on David Fishwick to buy up as many of these locations as possible, and have a 'Bank Of Dave' in as many towns and cities as possible.

    His business model is sublime, and has proven thus far to be a complete success.

  • rate this
    -2

    Comment number 15.

    but what about muh monopoly?

  • rate this
    +16

    Comment number 14.

    Who would want to buy a dodgy brand anyway? Co-op are best concentrating on other ventures.

  • rate this
    +31

    Comment number 13.

    In all honesty, would it make much difference how much 'competition' there was to the high street banking cartel?

    Modern banking, by it's very nature, has become a game of creating virtual money from any and every conceivable source. What makes anyone think that new owners means new practices?

  • rate this
    +1

    Comment number 12.

    Lloyds re Coop Board comments: "...increasing regulatory requirements on the financial services sector in general."

    Oh the irony. When the cure inhibits the recovery. Where next, Communism...?

  • rate this
    +1

    Comment number 11.

    #6 Wash you mouth out...
    Copy a sucessful German model!! How could you suggest such a thing!! Next you will want us to join up with all the Jonny Foreigners in Europe......

    Why do this when we can fail spectacualrly on our own.

  • rate this
    +1

    Comment number 10.

    I like post #6 and was going to suggest something similar as a solution. Perhaps even a small portion could be sold off at a fair, non-inflated price. Given the scepticism and such, deals involving the larger banks may spell disaster.

    With larger banks helping smaller and local ones, I'm sure this would improve their image of a tarnished industry, and to help to fulfill society's expectations.

  • rate this
    +12

    Comment number 9.

    So buying a 'clean' branch network which would have strengthened Co-Op's finances is dropped due to economic & regulatory concerns.
    Makes you wonder how the other banks make money given the current lending margin...oh , yes - that would be the investment arms of the banks.
    No wonder the banks are against splitting & ring fencing these

  • rate this
    +3

    Comment number 8.

    Well done Co-op. Thank god that someone has the sphericals to not get involved with the corrupt practices of the big banks. Next thing watch out for a run on the Scottish based banks as people get worried about the prospects of a separate Scots currency. Hopefully the Co-op has little or no exposure to this. Prudence is the watchword

  • rate this
    +3

    Comment number 7.

    RBS's problems (and those of several other banks) stem from buying competitor banks at greatly overvalued prices. Maybe this shows the CO-OP has more sense than other banks?

    #1 The taxpayer owns the majority of shares in RBS etc. Anything that boosts the share value effectively does go back to the taxpayer... or will do when the govt finally sells the shares.

  • rate this
    +1

    Comment number 6.

    Rather than sell the branches as yet another nationwide conglomerate it would be better to follow the successful German model and offer them as small local groups or even single outlets. As the Bank of Dave has shown local means better returns for investors and more funding for small local businesses the lifeblood of our economy.

  • rate this
    +3

    Comment number 5.

    1.bambarough "Any IPO sale should be done for free"

    What is more any IPO will waste huge sums of money which will go in fees to the banks.

    A far far better way is just to give the new shares to the existing shareholders - that is divide up the existing bank.

  • rate this
    -25

    Comment number 4.

    The word of bank is hot underside money markets. Give happy percent and only four, unknown!

 

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