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
    +5

    Comment number 143.

    66. LB
    "Trustee Savings Bank Bank"
    Plus how could anyone call these ridiculously over-paid executives anything other than idiots, when they obviously don't even know what the letters of part of their own company mean!"

    To be fair, it's not the bank's executives, but the BBC reporter who got it wrong.

    Also this is the 2nd failed attempted sale after the failed sale of branches to Santander

  • rate this
    -1

    Comment number 142.

    blaming regulation is priceless - talk about a cheap meaningless shot by the bankers. Especially poor coming from a so-called ethical bank.

  • rate this
    -5

    Comment number 141.

    We should have let the banks fail when we had the chance. Our kids and grandkids will suffer for this short-sighted obedience.

  • rate this
    -8

    Comment number 140.

    have shareholders been provided with a realistic break-up value?

    most of the activities of the uk clearing banks are hopelessly over-priced/uncompetitive

    and most of their staff superfluous

  • rate this
    0

    Comment number 139.

    How was this going to increase consumer choice. Bank customers were being forced to change who they bank with without any say
    Lloyds spent millions integrating the TSB brand into their group years ago. Now they are spending billions integrating HBOS into the group and more billions taking TSB out of it. Madness.

  • rate this
    +1

    Comment number 138.

    The co-op have saved themselves a heap of troble. Their ethical dealing procedures are not what others may like.

  • rate this
    +12

    Comment number 137.

    I have an account with the Co-op, but it's not my main account. The reason? The lack of a good branch network. You can do some things at the Britannia, but it's not integrated. Until they get a comprehensive branch network, they won't get mainstream custom. The internet is fine for most things, but branches are needed for backup and personal contact.

  • rate this
    0

    Comment number 136.

    76.Jimmy G

    "Banks give customers branches, cheque books, ATMs, Point of Sale terminals, 24*7 call centres, Secure internet facilities, mobile banking and all for free. "
    Whilst I agree there may be little money made in retail banking, nothing is given at all. The services you mention are just to cut their costs - bar cheques, which they want to get rid of!

  • rate this
    -12

    Comment number 135.

    Good this fell through, I am a TSB customer and did not appreciate TSB getting bought out by and English bank, but definitely did not want Co-op buying out by bank, better for the TSB to be listed on the Stock Exchange and be a Separate Bank again like Scotland will be in 2016!

  • rate this
    +1

    Comment number 134.

    115.Duke of Earl
    When will we get the true story of how Gordon Brown destroyed Lloyds during the merger with HBOS?...
    ---
    The US Lloyds shareholders' class action is ongoing - Lloyds failed to get it struck down.
    So the details of the 'deal' between Brown & Sir Victor Blank (ex Lloyds chair) could yet come out in a US court. I wonder how Brown would look in an orange jumpsuit? Here's hoping.

  • rate this
    -1

    Comment number 133.

    Massive announcement affecting many shareholders, big and small. Result: drop of 0.09 in share price.........no insider knowledge there then....

  • rate this
    +1

    Comment number 132.

    As a Co-op bank customer for many years - I am glad its off. Co-op has in my experience been all about decent quality service and caring for its customers - whereas Lloyds never was and is something of a 'poison chalice'.
    If our government wants some new bank to challenge the big 4/5, why don't they use one of the 2 banks we already own and establish a 'national bank' ?

  • rate this
    +11

    Comment number 131.

    A sensible move by the Co-op and it appears that Lloyds were expecting this to happen, since they had been progressing their plans to sell off the branches in an IPO. Better to let Lloyds keep the branches.

    The challenger banks idea was always wishy-washy thinking by this Government. As was seen in the financial crisis, being UK retail banks which went bust due to lack of capital & bad decisions.

  • rate this
    -1

    Comment number 130.

    For "the worsened outlook for economic growth and the increasing regulatory requirements", presumably read 'reduced opportunities for stuffing inappropriate overpriced bits of paper at customers'?
    As HSBC lays off staff, we have to worry that the financial sector will not be riding to the rescue just yet; neither as employers or lenders!
    What a waste of space!

  • rate this
    +5

    Comment number 129.

    Lloyds saved HBOS, there is more detail regarding Gordon Browns government & this fiasco that is not in public domain.

    As a consequence of Lloyds saving HBOS, it put Lloyds at risk & ultimately damaged Lloyds.

    I cannot see why Lloyds would do this without good reason, but what are those reasons. Balls & Brown & Miliband & co still have MANY unanswered questions regarding banking fiasco

  • rate this
    -3

    Comment number 128.

    People join Lloyds because they are big and they dont have to change bank accounts when they move. Shoving them into a tiny TSB bank goes against what they wanted without so much as a by your leave. Nice. Nothings changed, nothing will change till the old school tie corruption is tackled which will be never.

  • rate this
    -4

    Comment number 127.

    I don't understand why Lloyds told their customers this was going ahead by letter before the deal was sealed? Is there anything else they are bluffing?

  • rate this
    -2

    Comment number 126.

    I love the Co-Op bank (and shops). Really glad this deal fell through. Even though I don't have a branch close by, I prefer the small ethical bank that isn't trying to sell you something as soon as you walk through the door or ring them up.

    By comparison, my wife had an RBS and Santander account. Walking into those places was like entering Honest Joe's car showroom.

  • rate this
    -1

    Comment number 125.

    It's a shame - I've banked with the Co-op for years and never been in a branch as there aren't many. I've often wondered if more people would turn to ethical banks if there were more branches they could walk into. Thankfully most banking needs for Co-op customers can be done at any post office.

  • rate this
    0

    Comment number 124.

    I am a Lloyds customer and my branch is one of those earmarked for sale. I would dispute that we were given the option to remain with Lloyds as the first letter said we would be. I visited a local branch to transfer my account to them and they said wait for the second letter, there was plenty of time. Once that letter was received it was too late. I am not happy that this can just be done to me.

 

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