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
    0

    Comment number 203.

    Will Lloyds Bank account holders see any benefits from the sale of these branches? What about the tax payers who currently own the bank? Or will the bankers get huge bonus payments again as the assests are sold off and the profits go up? Seems to be a bit of a con going on somewhere!

  • rate this
    -1

    Comment number 202.

    re 66 "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!Seems these guy's erning £millions+bonuses don't even have basic reading skills."

    Erning? LOL. The TSB called itself "TSB Bank" back in the 90s, the letters TSB ceased to stand for anything. It's the same with HSBC.

  • rate this
    +2

    Comment number 201.

    197.rogerj
    I think you'll find the rules were changed several years ago. The same issue also came up around a co-operative merging with a mutual (Co-op/Britannia). Less tinfoil hat, more facts next time please.

  • rate this
    +1

    Comment number 200.

    I'm delighted to hear this news. I was about to downgrade my Co-op account to a minor second account. The Co-op would have relied on Lloyds for many things including their computing system. Essentially the Co-op would have been the "green/eco" face of HBOS/Lloyds.

    HBOS poisoned a healthy bank (Lloyds), I don't want HBOS/Lloyds poisoning the Co-op.

  • rate this
    -1

    Comment number 199.

    #178. David - do you think that just before the banks "were squeeezed out of existence", monies set aside for bonuses would be used instead to provide funding for engineers and scientists?
    Just a thought (admittedly a bit revolutionary!)

  • rate this
    +15

    Comment number 198.

    As a Coop member and Coop bank account holder I'm glad the directors are taking care to avoid the recklessness that got other institutions into trouble. The Coop is not 'too big to fail' and their credit worthiness has been written down as a result. I don't mind for a minute.

  • rate this
    -1

    Comment number 197.

    rogerj
    The Co-op Group should give the real reason for dropping out & wasting their members money on this exercise. As a Co-op they are unable to buy or contol a bank.

  • rate this
    +2

    Comment number 196.

    This is the Co-op that opted out of paying compensation on endowment policies for a certain group of people and now are pulling out because of tighter rules and regulations.No other comments.

  • rate this
    0

    Comment number 195.

    Maybe they realised that customers have the right to choose their banks and were not going to tolerate being "moved" forcibly to the co-op.
    The EU and the government have no right to try to make me switch banks.
    The co-op is a great organisation, but their bank network is antique.

  • rate this
    +1

    Comment number 194.

    @178
    Yes, what we really need is for banks to be squeezed out of existence! That's what the economy needs, no banks! Then all your engineers and scientists will be unemployed because businesses can't get funding!


    Could have used the £1.3 trillion for funding engineers, scientists and business instead of middlemen who purchase toxic debt in the hope of making a quick buck!

  • rate this
    -2

    Comment number 193.

    Good news. I have been a Llyods customer since 1974 and do not do online banking. Already heard that I will not be part of the TSB move too.

  • rate this
    +3

    Comment number 192.

    Banks don't necessarily need more regulation, just good and effective regulation. The Co-op doesn't have an investment arm. It is just a retail bank and it didn't need any bailouts. So if they are citing the increasing economic burden of increasing regulation as a reason for not expanding then something is wrong. Personally I've used the Co-op/Smile for years and never needed to go into a branch.

  • rate this
    +1

    Comment number 191.

    81.Donkzilla
    ...and then Barclays invest the money with arms companies or questionable regimes, etc. Ethical =/= give me the cheapest product. The policy is freely viewable online and you would have been mailed each and every year of those 30 you say you were with them to have your vote. It's there to outline where capital is invested and which companies they are prepared to do business with.

  • rate this
    +1

    Comment number 190.

    185.Tio Terry

    '...Could I just remind you what de-regulation of the banks led to? You advocate less regulation of the casino banks than at present? That would only mean another publicly funded bail out..'

    Well, quite clearly we need some sort of middle ground. Over the top regulation can be just as bad too little regulation.

  • rate this
    +4

    Comment number 189.

    Yet more bank bashing!
    Have a look at LBG pre and post slump and look at where the 'blame' for this lies.
    People want banks to keep more capital but want them to lend more whilst getting rid of business built up over years. It's like me telling you to lend me £20, put £20 away in case I don't repay you but then tell you to quit your job so can't earn the money anyway!

  • rate this
    +1

    Comment number 188.

    @178. David

    "Yes, what we really need is for banks to be squeezed out of existence! That's what the economy needs, no banks! Then all your engineers and scientists will be unemployed because businesses can't get funding! Brilliant."

    maybe you should learn to read, i said tougher regulations, that will not squeeze them out of existance. If you haven't notice banks have already destroyed business

  • rate this
    +1

    Comment number 187.

    Lloyds/Co-operative Bank decision - could real stumbling block be regulators' investigation into manipulation of global interest rates. Other British banks, including Barclays & RBS have been fined millions of dollars in connection to the rate-rigging scandal. Ultimate outcome of the various regulatory investigations is foggy.
    How can sale be made under these conditions?

  • rate this
    +1

    Comment number 186.

    @160 Jason
    "Millions of small businesses would have gone bankrupt, everyone would have lost their savings/salary/benefit/pensions"

    Then why not compensate them instead of the banks?

    "The country would have been in ruins"

    It is now!

  • rate this
    0

    Comment number 185.

    182.Andrew W
    Could I just remind you what de-regulation of the banks led to? You advocate less regulation of the casino banks than at present? That would only mean another publicly funded bail out.

  • rate this
    +1

    Comment number 184.

    It's very sad - we need more Co-op bank branches. At least the Co-op has some sort of ethical standing unlike the rest of the rubbish we are forced to use.

 

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