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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  • Comment number 323.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 322.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 321.

    It was never going to happen - from the start the Co-op bit off more than it could chew. It doesn't have the capability to buy another bank and make it work from an operational or financial perspective. It will be interesting to see who will buy a bank that has branches, but no guaranteed customer base. Customers are free to walk away from whoever ever purchases them.

  • rate this

    Comment number 320.

    @nagivatorjan All LTSB shareholders were consulted prior to the takeover and voted overwhelming in favour. What wasn't made apparent was the massive loan HBoS had to take from the BoE prior to the takeover to prevent complete collapse. Left on its own, LTSB would still have needed a bailout, due to the increased amount of capital all banks needed to keep to cover future losses.

  • rate this

    Comment number 319.

    @FuzzyX Lloyds had to write to all affected customers to advise them of the divestment, prior to the rebranding to TSB. Would you prefer that they hadn't written and told you? Surely, you'd be on here ranting that you had been kept in the dark if they hadn't!

  • rate this

    Comment number 318.

    Halfway through a Bank Application with the Co-Op but ' thanks' to the heads up regarding its probable demise from Mr. Peston earlier, I will definitely no longer be pursuing.

  • rate this

    Comment number 317.

    This is funny seeing that I got a letter from Lloyds-TSB not too long ago announcing this planned split. Looks like they now owe their customers another letter once they figure out what to do. Their current idea though to just let them run as independent banks does not seem the best plan.

  • rate this

    Comment number 316.

    What is this obsession with competition and choice? Take a look at anything that's been privatised and you can see how brilliantly "competition" rips off everyone!

    Also, renaming the branches TSB Bank? Presumably you'll need a PIN number to access your ISA account and branches will be kitted out with MDF board? Someone teach these muppets English please.

  • rate this

    Comment number 315.

    re 299 Dopey. Indeed Co-Op bank have set aside £130 million for possible claims settlements. Lloyds however are, as illustrated below, much worse off: from MSE "Here are the top 5 PPI mis-sellers among UK banks:
    #5 Santander - £821 million total PPI provision
    #4 HSBC - £1.11 billion
    #3 Royal Bank of Scotland - £1.735 billion
    #2 Barclays - £2.176 billion
    #1 Lloyds - £5.275 billion

  • rate this

    Comment number 314.


    "...High Street banks are a relic of the 20th century and only exist for the very old fashioned type of bank customer who doesn't have an internet connection...."


    I have an internet connection. But only the other day I received a spam email. Had I clicked on the link, I'd have installed password-mining malware.

    Wide-eyed technophiles are welcome to all this crap.

  • rate this

    Comment number 313.

    What never seems to get mentioned on the news by the BBC is the Lloyds and C&G customers that are effected. Through no fault of their own they are being sold off. The only way to remain with Lloyds will be for them to reapply for their accounts. For many it will mean they will no longer have a local branch. Currently I can walk to my branch but in the future my local branch will be 5 miles away.

  • rate this

    Comment number 312.

    I my ex wife and kids all had accounts at the local branch of the TSB when it was the TSB. When sold it lost its values for the sake of profit. Sad to say no matter what NO bank and I mean NO bank will give you value for money because if it did it would cost them money and we all know we cannot have that.

  • rate this

    Comment number 311.

    I'm glad this is not going ahead.It's not a good move for Co-op.Fred the shred took on another bank without thinking ahead in his rush to make even bigger bonuses and pension and we are all paying for that.We do need more choice but time for smaller but more customer oriented banks.

  • rate this

    Comment number 310.

    Lame duck companies propped up by the government/taxpayers.
    This sounds like 1970's Britain.
    What was the solution?
    Stop throwing good money after bad.
    Think the unthinkable.
    Let those companies/banks/individuals who made bad decisions during the good times pay open market interest rates.
    Stop making the innocent pay for the Global Financial Crisis.
    At some point it will end in tears.

  • rate this

    Comment number 309.

    Jen 698 - I don't know if you are a member, or an employee, but whilst what you have said is true, these were all achievements which were largely smoke and mirrors.

    Having seen the business operating from the inside, I was appalled by the arcane and wasteful manner in which it ran its operations. Also, the senior management cut and ran when the Britannia deal was struck. Ethical, I think not.

  • rate this

    Comment number 308.

    This demonstrates (along with other sector news today) that the banking sector in the UK, upon we rely to grow our economy going forward, is weakening. The co-op has cited a weaker economy together with increased government legislation on banking. The UK is seen as the least regulated 'developed' economy in which to locate financial business, these changes in the sector may have changed that.

  • rate this

    Comment number 307.

    The good news is that we get the TSB brand back on the high street and the Co-op makes a sensible decision after much deliberation. The original TSB and the current Co-op both base their business on strong customer service and staff involvement above shareholder profit. Let's hope they both continue with the same values.

  • rate this

    Comment number 306.

    Of course the private sector will get of out of the hole they got us into.............one day............its just around the corner.........they are just comming......crisis over.......jobs for all......have faith...confidence is coming back.

    Except they are off making money in China just now...back in a bit.

  • rate this

    Comment number 305.

    @298 as a co-op member I am not disappointed in the least!
    Co-op has made mistakes (mis-selling ins) but still remains the most ethical bank.
    Forward thinking always ahead of the game,,, first internet bank, first telephone banking, always been free current account, first link machines and first to sell off unprofitable bits before they got into trouble (travel, some ins products)

  • rate this

    Comment number 304.

    What co op is realy saying is there is no profit to be made from this sell/buy deal.
    More proof that all banks are interested in is making vast profits from the bank user, if the government really want to create pressure they should nationalise the loyds banks that are up for sale, afterall the public own a percentage of them anyway.


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