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
    +1

    Comment number 243.

    I hope the new bank will be called TSB, a trusted name from the past. I had a TSB account opened for me by my father when I was about three and only became a Lloyds customer as a result of take-over. The Co-op is a Labour party benefactor, and this would have made me look for another bank. Brown, Blank and Daniels should be investigate for their destruction of Lloyds TSB.

  • rate this
    0

    Comment number 242.

    240
    ABN Amro (a European bank) is in the hands of European banks - inclusing our very own RBS - most of which have needed bailing out themselves. Some of the European banks are even deeper in the doodoo than ours are. Without an investment arm, all costs fall on those who bank with them - anyway, mortgages can be classed as investment banking.

  • rate this
    0

    Comment number 241.

    The co-op should never have got involved with this in the first place. Interesting interview where the chief exec implies that they got involved in the deal based on a tory chancellor's fanciful growth forecasts - did they really believe these forecasts - did anybody? I suppose thay do deserve a little bit of credit for getting out of it before getting their fingers badly burnt

  • rate this
    +1

    Comment number 240.

    Starting with Girobank through to the demutualisation of the Building Societies, successive governments have enabled the concentration of financial services in this country into the hands of a few large banks.
    Most European countries still have a diversified banking sector, with tighter regulation too.
    Can't see any of the main parties doing anything about it.Retail v 'investment' banking, when?

  • rate this
    +5

    Comment number 239.

    220
    I take it you'd sooner have bailed HBOS out? Lloyds TSB was conned by Gordon B. Ruin into buying HBOS, which was in a worse state than they let on. That's why they needed a bailout themselves when they discovered the financial mess they had acquired.

  • rate this
    0

    Comment number 238.

    @237.Lee Smith
    Is this an opportunity for Tesco, Asda or Sainsburys.

    It does and the fact that neither Tesco nor Sainsburys Bank appears to see value in a high street presence tells you everything you need to know about the profitability of high street banking. The EU, which mandated the sale, appears to believe that a huge expensive branch network is a competitive advantage in the 21st century

  • rate this
    +1

    Comment number 237.

    Is this an opportunity for Tesco, Asda or Sainsburys. Most have a network under their brand names, this could give them a directly controlled operation?!

  • rate this
    +4

    Comment number 236.

    If Lloyds had not been conned into saving the basket case HBOS by the government it would not needed bailing out. I moved my business account to Lloyds TSB from the Co-op many years ago, they proved to be very poor and not very professional. If they had taken on the branches most of the customers would have moved to another Lloyds branch.

  • rate this
    +2

    Comment number 235.

    As soon as I heard that Gideon Osborne was eager for the Co-op to buy Lloyds TSB, I heard alarm bells. I would not buy a secondhand car off that man let alone a failed bank.
    Plenty of talk about the Lloyds TSB staff, but failure to mention about the Co-op Insurance Staff that suffered through this, by being literally sold off to Empire build.

  • rate this
    +1

    Comment number 234.

    @231.Andrew MacGregor

    Lloyds were gifted TSB and Scottish Widows

    Err, no. Paid £7 billion for SW and TSB shareholders voted to merge their company with Lloyds. No gifts exchanged hands.

  • rate this
    +1

    Comment number 233.

    Quite pleased really. The Co-op have spent the last ten-fifteen years extolling the virtues of not having a big branch network to spend money on. As it is, my local branch isn't brilliant - go to discuss your account and all they're interested in is selling you something! :(

  • rate this
    +1

    Comment number 232.

    I suspect that Co-op's decision is based on common sense with a dash of party politics thrown in. Good for them for not bailing out a mess made by greed.

  • rate this
    -3

    Comment number 231.

    good!
    Lloyds were gifted TSB and Scottish Widows and they should be forced to float the business as a bank that meets all the criteria and sell the shares at a good market rate and pay the money to the treasury.

  • rate this
    +1

    Comment number 230.

    I work as an accountant. When the banking crisis hit, we lost a few profitable client because the banks withdrawing funding without notice.

    There was a few good guys stepped upto the mark. The Clydesdale are one of the good guys. Best advice I can give, don't tell the banks you have assets. Some of our clients did and they were the ones who had funding withdrawn. Don't trust them.

  • rate this
    +2

    Comment number 229.

    I don't quite understand why people are bemoaning the lack of Co-Op branches....I can do all transactions necessary via the Post Office and online. I even have a little app on my phone to check my balance.
    I'm pleased they opted against this purchase, rather keep afloat as they are than be dragged down by a risky purchase.

  • rate this
    +2

    Comment number 228.

    Why do people need a local branch? The Co-op's online bank gets the best customer ratings in the country, you can do almost all business over the phone - and cash transactions can be done at holes-in-the-wall or at a post office.

  • rate this
    +5

    Comment number 227.

    #224: "This is a prime opportunity to open a state run bank. No "products" just one interest paying current account, one limited access higher interest deposit account and one interest charging loan system"

    Sounds reasonable - as long as you understand that without the revenue from high-value products such a bank would have to charge its customers for every transaction just to cover costs.

  • rate this
    +2

    Comment number 226.

    "He (Robert Peston) said that the Co-op will now review the future of its banking business". He goes further in his own report suggesting that Coop will get out of the Banking business altogether.

    Rubbish! The Coop statement is clear - it says "we will continue to develop our Bank for the long-term, offering a real alternative on the high street"

    Coop may be knocking at BBC's door soon!!

  • rate this
    -3

    Comment number 225.

    What a waste of tax payer's money - over £1 billion spent on this project...

  • rate this
    -3

    Comment number 224.

    This is a prime opportunity to open a state run bank. No "products" just one interest paying current account, one limited access higher interest deposit account and one interest charging loan system, lending only to those who have security and can easily afford repayments.
    But since any politician that does this can kiss goodbye to his post-MP high street bank board job, it will never happen.

 

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