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

    Comment number 63.

    So long as whoever gets the C&G branches (which were going to the Co-op) honours the 2.5% mortgage SVR and lets me pay £150 extra off the capital each month, I'm not too fussed who runs it.

  • rate this

    Comment number 62.

    Re 54. Hugo Grotius
    “When Brown/Darling coerced Lloyds TSB to take over HBOS during the financial crisis they sowed the seeds of this problem. What a pair of buffoons”

    The seeds of this problem were sown on 27 October 1986.

  • rate this

    Comment number 61.

    Aahhhh, bless. Well, what do they expect? Proof that NO ONE trusts the banks anymore, not even the banks! ;)

  • rate this

    Comment number 60.

    Lloyds acquire the toxic assets of HBOS. Coop looked at picking up toxic assets from Lloyds but fortunately saw the light.

    Why can't the banks concentrate on steady growth by running honest banking services at a reasonable price, rather than more wheeling and dealing.

    If no one wants the branches then close them and help the staff create manufacturing businesses rather than paper shuffling.

  • rate this

    Comment number 59.

    I've said all along that the Verde branches should be given to the govt in exchange for their 40% stake. A simple solution. The TSB can be run as a government owned bank until the day when the market is right to privatise it, just like when it was floated back in the 80s. This way they'd be no uncertainty about the sale, no profiteering and the future of the employees is safe-guarded.

  • rate this

    Comment number 58.

    Well done Co-op, I seem to remember the last entity that invested in Lloyds didn't make any money out of it either.

    Oh hang on, that was the government, on our behalf...

  • rate this

    Comment number 57.

    The bank bashers should note this, often the supposed 'decent' bank is now reviewing its entire activity in banking due to amongst other things, 'the increasing regulatory requirements on the financial services sector in general'.

    It might help if regulators just made cheating as a business policy illegal. Much UK business generally rely on it. Dropping account rates, complexity, intro offers.

  • rate this

    Comment number 56.

    The Co-Op are no better. When the One Stop store closed in my village opposite the Co-Op, they bought it and left it standing empty for years whilst they jacked up their prices like a monopoly does! Their wine is so expensive now they have to put security tags on it !

  • rate this

    Comment number 55.

    31. massive_cynic
    @ 20. Glenn Willis

    The Co-op is the closest thing the UK has to an ethical bank.


    Possibly true, but you don't have to do a massive amount of scratching of the surface to discover they have their own (what some folks may see as) dubious history and connections.


    Aye! I did say "the closest thing" ;-)

  • rate this

    Comment number 54.

    When Brown/Darling coerced Lloyds TSB to take over HBOS during the financial crisis they sowed the seeds of this problem.

    What a pair of buffoons.

  • rate this

    Comment number 53.

    I'm old enough to remember the days when you could do some of your basic banking needs (e.g. paying in or cashing a check) with the Co-Op bank, in Co-Op stores. If they want to expand their banking facilities perhaps they should look at re-introducing in store banking.

  • rate this

    Comment number 52.

    Why can’t we have all posts listed by default?

    Then if we are interested in the BBC’s opinion rather than the General public’s we can click on “Editors Picks”

    It is, after all called have YOUR say, not what the BBC says.

  • rate this

    Comment number 51.

    I am glad they are not selling to the co-op. Nothing to do with Lloyds. I just don't think the co-op can afford it and I think it is too risky for the Co-op.

    I like the fact that Lloyds have decided to split the division off and brand it as TSB. Lloyds seem to have their head screwed on now and watch their shares grow. Really undervalued

  • rate this

    Comment number 50.

    Hmm, not as easy as it looks, then.

  • rate this

    Comment number 49.

    As a Co-op bank customer for the last 12 years I'm glad they're not going through with the deal - it wasn't so much the growth that concerned me, it was the culture that would be imported from Lloyds. Very worrying though that the Co-op might pull out of banking altogether; Smile and Co-op business banking have provided me with excellent service and there seems to be no ethical alternative.

  • rate this

    Comment number 48.

    I too would have liked the Co-Op to be banking more locally for me too. I changed from Natwest about 18 months ago, who I'd been with since leaving school.
    The Co-op is a fantastic bank, the staff couldn't be more helpful.
    I'm a bit disappointed really the sale hasn't gone through as my local branch is a good distance away.

  • rate this

    Comment number 47.

    I received a letter but i was not given the option to stay with lloyds.
    I think i`ll swap branches.

  • rate this

    Comment number 46.

    Yet another example of our casino type banking culture. This just would not happen in Germany. Banks have been cash cows for a rich elite eversince 1987. They have no grasp or nous for banking as its done in say Germany.

  • rate this

    Comment number 45.


    Time for a Nationalised Bank that puts people before excessive profits, now that would introduce a bit of competition for the banking cartel.


  • rate this

    Comment number 44.


    Precisely. One bank collapse in the US threw the global economy into a meltdown overnight. Better to take the pain now and wait for an inevitable crash. All debt based economies crash eventually, it is but a matter of time, but unfortunately chance of reform before a crash isn't likely because the public simply won't vote for it. Standards of living would plummet if reformed.


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