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 283.

    275
    The Govt has a minority stake in Lloyds TSB, far smaller than their stake in RBS. They wouldn't have needed a bail-out if it hadn't been for HBOS. And no, I don't think Lloyds TSB shareholders were consulted on it. It was one of these things that went through quite quickly with almost a guarantee from Brown & Balls that they wouldn't lose money.

  • rate this
    0

    Comment number 282.

    @273 Sally

    Surely the Co-op should be liable for some sort of cancellation costs in view of termination of the sale at such short notice.

    Sally Surely you understand the difference between a binding and a non-binding agreement? Look it up. If you need help try G**gle!

  • rate this
    0

    Comment number 281.

    246.Doctor Bob
    Rather obvious. Those 600 branches are put up against the remaining branches competing for the business of a finite number of customers. Who provides the best products and service wins. And so in theory do the consumers.
    Anyone who has worked in a bank will tell you that there is plenty of competition, driving longer hours, reduced pay and conditions etc. Govt is out of touch.

  • rate this
    +1

    Comment number 280.

    Perhaps we should have had forsight and just lets RBS-NATWEST, B&B, Northern Rock, Halifax Bank of Scotland, LTSB, C&G, Birmingham Midshires go into liquidation with savers only keeping the first £85,000. Sound familiar.

    FACT-Labour, Tory, LD, Nationalist they are all corrupt and so are BANKERS!!

  • rate this
    0

    Comment number 279.

    I just keep my money in bin liners under my bed in the smallest notes possible, got like £3000 saved up hehe!

  • rate this
    0

    Comment number 278.

    @270
    You are clearly a tory troll. Poor anecdotal "evidence" that the UK is "anti-success". A "wealthy" friend who banks in Switzerland? Hahahaha.

    A poor argument wheeled out time and time again for pushing the ideology of deregulation and the so-called "free market".

  • rate this
    +1

    Comment number 277.

    The future of banking lies online and not on the High Street. So Coop Banks customers should be happy.

  • rate this
    +1

    Comment number 276.

    I have an account at one of the Lloyds Branches affected, & I would have transferred to another Lloyds Branch. I'm not doing business with an organisation that donates funds to the Labour Party which was responsible for the lack of regulation in the banking sector in the first place.

  • rate this
    0

    Comment number 275.

    239. nagivatorjan

    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.

    Did LTSB shareholders not vote on merger? & Did I read LTSB needed a bail out themselves with or without HBOS?

  • rate this
    -2

    Comment number 274.

    There will be no economic recovery without the closure of half of the banks and the arrest of about 100 criminal City bankers to face the Courts.

  • rate this
    -1

    Comment number 273.

    Although I'm largely unaffected - my branch remains with Lloyds - the other day I received some printed information (effective 24 July) about how the sale might effect my banking. Surely the Co-op should be liable for some sort of cancellation costs in view of termination of the sale at such short notice.

  • rate this
    +3

    Comment number 272.

    @270 Fiscal prudence. Where does he keep the bulk of his money? In Switzerland.

    Hope he pays his income tax and Capital Gains tax or is he a TAX dodger?

  • rate this
    +1

    Comment number 271.

    The Co-Op is a very ethical bank, perhaps they revealed some accounts they would gain not quite within their lending criteria?

  • rate this
    -6

    Comment number 270.

    I have a very wealthy friend and ex colleague who made all his money by way of an enterprising mind and extremely hard work. Where does he keep the bulk of his money? In Switzerland. He tells me the UK is anti enterprise, anti success and well on the way to complete economic collapse. We are only 3-4 years from the IMF arriving. Whoever owns the banks is an irrelevance. I agree.

  • rate this
    +1

    Comment number 269.

    @267.Andrew MacGregor

    "SW a pinch at £7Bn. A mutual at the time.
    TSB's so-called merger? ... A business sold off illegally and without members permission by Thatcher."


    Lloyds likely to sell SW and it'll be for a fraction of £7bn.

    Bizarre and unsubstantiated claims re TSB merger with Lloyds - 5 yrs after "Thatcher" left office. Evidence of illegality please?

  • rate this
    -5

    Comment number 268.

    Typical Co-oP, they never make much of a go of anything they do be it supermarkets, travel agents or banking. Better for us all if they stick to undertaking!.

  • rate this
    -2

    Comment number 267.

    @234
    SW a pinch at £7Bn. A mutual at the time.
    TSB's so-called merger? A vote that got all TSB SMT into superb new well paid roles in the new group and lost jobs aplenty at TSB HQ. A business sold off illegally and without members permission by Thatcher.

  • rate this
    0

    Comment number 266.

    I'm incredibly glad this didn't go through! As a former employee of the Co-operative Bank I know how they treat their staff and how every customer is an "opportunity" ...to sell something. I've been in the bigger banks many times and never felt as bad as I was supposed to make my customer's feel. They're not the compelling co-operative alternative - if anything they're worse than the others.

  • rate this
    +4

    Comment number 265.

    As a Co-operative member and having banked with them for 35 years it worried me that the Bank would have bitten off more than they could chew. I realised that the banking system needs a kick to get things moving but maybe the government are just a bit clueless how to do it. But my narrow view is, 'Not with my Bank they don't!'

  • rate this
    +1

    Comment number 264.

    The position of the Co-Op as the 'Ethical Standard Bearer' of British Banks has diminished year after year.
    The Merger with Britannia Building Society some four years ago is still not complete,and in the opinion of many staff members, is a Shambles.Wake up Peter Marks!
    There is absolutely no way that the current Management team could have overseen the purchase of these new Branches Successfully.

 

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