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 263.

    Once again, Lloyds Bank is NOT owned by the UK tax payer. The Government has about a 40% holding which does not give it control. Being partly Government owned does not give you as a taxpayer any right to anything and rest assured, you will not get anything either.

  • rate this

    Comment number 262.

    It was the behaviour of the national and international financial system dominated by greedy corrupt private banks that led to the 'Great Recession'
    The so-called 'masters of the universe' have been proved to be incompetent thieves.
    There must be at least a hundred extra seats for Mr Miliband if he has the courage to say 'no more banking bailouts under any circumstances'

  • rate this

    Comment number 261.

    Why are people who currently bank with Lloyds being negatively rated for not wanting to join the Co-op. My mother has banked with Lloyds her whole life, she feels they treated customers well Yet her branch was due to become a co-op but she was told she couldn't switch branches to remain with Lloyds. So Co-op or another bank, when she wanted to stay at Lloyds - what happened to customer choice?

  • rate this

    Comment number 260.

    251 Treacle_01
    Actually, they only got the bit Fortis had - the parts RBS and Santander had were subsumed into their normal trading and are part of the reason both got into trouble. Used to work for them.

  • rate this

    Comment number 259.

    The risk of being demised would be enough to put anyone off.

  • rate this

    Comment number 258.

    Of interest to me is the demand itself by European regulators as the price for being bailed out by the UK government during the financial crisis. It is difficult to comprehend this logic or its motives. EU regulation was at least as bad as our own and did not clean up huge problems underlying French and German banking leverage.

    A banana skin remains. 4.6 mn customers who may not wish to transfer

  • rate this

    Comment number 257.

    They did not think the money situation was likely to improve- well those getting nil interest on their savings have known this for a long time and all we can do is hope the interest rates WILL rise one day.
    Co op bank worked well for me incidently they have the right degree of caution in their dealings unlike some of the very big syndicates.

  • rate this

    Comment number 256.

    Rarely visit a Bank, only need to if paying in a cheque which I generally decline because it means going to a bank. Everything else is done online. When I do have to ring up for any reason I prefer to speak to someone for whom English is native language (not HSBC!). Don't want to be sold "Products", just need my money to be safe and available. That's not what banks offer any more.

  • rate this

    Comment number 255.

    What's all this about the co-op bank being rubbish? I have banked with them for almost 40 years and haven't once had cause for complaint. The lack of branches is the ONLY drawback and that is only a problem if you need to pay cash in, in a hurry. The people who bank with those 600-odd Lloyds branches have missed out on the opportunity to bank with an excellent bank, with excellent customer service

  • rate this

    Comment number 254.

    Good - I didn't want to be a customer of the Co-op.

  • rate this

    Comment number 253.

    The Coop look like they have been very indecisive. If they didn't want to do it why did they start discussions? If they didnt get the deal they wanted thats fair enough but I don't think that's the reason.

    "There will be other opportunities to expand our bank in the future"
    - err I dont think so......

  • rate this

    Comment number 252.

    "This 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".

    If you cut a Labour front-bencher in half, do you reckon this is what it'll say in the middle?

  • rate this

    Comment number 251.


    ABN Amro (a European bank) is in the hands of European banks

    Nope. Owned by the Dutch government.

  • rate this

    Comment number 250.

    Lloyd´s bank is owned by the tax paying public , when will we get our money back that was stolen from us to pay for the bank , and how much. Me thinks nothing , the phrase `Government money ´ will be used. There being no such thing. Complete crooks the lot of them.

  • rate this

    Comment number 249.

    245 Steve Richards
    The idea is good, but unless they were completely separate entities, the parent company is still in the same position, plus you've then got several 'competitive' organisations which are not truly competitive (eg YBS/N&P/Chelsea/Bradford Building Societies). And you have more 'bosses' trying to get a slice of the pie.

  • rate this

    Comment number 248.

    Disappointed as I am not to have a Co-Op branch on our High St, perhaps government minds will now focus on the real problem. Banks create, out of nothing, the money our economy runs on and they create it as debt. That is the underlying reason for our world banking crisis. Creating money (debt free) should be under State control. Full Reserve banking would start us on the road to stability.

  • rate this

    Comment number 247.

    I had an account with the coop which I closed in 2002. I am still getting statements from them telling me that I have no money invested with them despite me telling them that I closed my account. I wonder if they will stop sending me statements if they merge with another bank?

  • rate this

    Comment number 246.

    Stupid reasoning. The gov is disappointed because the move was hoped to increase banking competition on the high street. But if you're simply taking 600 branches of one bank and attach them to another, how does that increase competition?

  • rate this

    Comment number 245.

    If we want sectors of the economy to enjoy the benefits of competition, then arrange for any business, when reaching a turnover of greater that 20% of the market sector to pay substantially more tax.

    Companies will then feel the urge to 'float off divisions' or diversify operations etc.

    We would then have much more competition in each sector of the economy.

  • rate this

    Comment number 244.

    The biggest barrier to a sensible solution is the government's irrational prejudice against public ownership. In the present climate the Government should take into ownership and run the branches Lloyds are required to divest. The government can then put money where its mouth is in terms of supporting local businesses. A new asset is also developed that can be privatise later.


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