| Co-op buys 632 Lloyds branches |
LONDON Lloyds Banking Group has struck a deal to sell 632 branches to the Co-operative, transforming the group into a powerful new rival to Britain’s dominant high-street banks.
Mutually-owned Co-op said the sale would lift its share of Britain’s bank branch network to 10 per cent from less than 4 per cent, equipping it to take on the country’s ‘Big Four’ lenders - HSBC, Barclays Royal Bank of Scotland and Lloyds itself.
“People have lost trust in the financial services sector. Now we can provide a big bank, a challenger bank, that people can really trust,” Co-op Group CEO Peter Marks told reporters.
It is estimated around 4.8 million Lloyds customers will transfer to the Co-op along with up to 7,000 staff. The Co-op’s high street presence will expand to around 1,000 branches.
Lloyds, ordered by European regulators to offload the branches as payback for a state bailout it received in 2008, will transfer 24 billion pounds ($37.49 billion) of loans to Co-op under the deal, well below the original target of about 70 billion pounds.
Lloyds will likely make an overall loss of up to 700 million pounds on the sale, while the scaled-back loan disposal means it will need regulatory approval for the deal, a source familiar with the matter said.
The bank said any loss would be counterbalanced by a lower capital requirement, and there would be no lasting hit to group profits.
“Today’s agreement is an important step in meeting our obligations under the mandated sale of our branches,” Lloyds CEO Antonio Horta-Osorio said.
“We believe the cooperative will be a good owner for our business, customers and colleagues, and the combined banking business will be a significant competitor on the high street.
Lloyds, which had been expected to raise as much as 1.5 billion pounds from the branch sale, will receive just 350 million pounds upfront.
It also stands to collect further payments spread out until 2027 with a present value of 400 million pounds, depending on how the newly-created business performs.
Lloyd’s opted to sell to Co-op even though it received a higher offer for rival bidder NBNK, an acquisition vehicle created in 2008 to create a new retail bank out of assets being sold off by distressed incumbents, an industry source said.
NBNK offered about 800 million pounds in cash upfront for a comparable package of assets, plus slightly higher deferred payments spread over a shorter time period, the source said.
A Lloyd’s spokeswoman declined to comment on the size of NBNK’s offer, but said the bank had decided selling to Co-op offered greater certainty to customers and employees and had a better chance of success.
Co-op’s Marks said Britain’s financial regulator was “very pleased” the new bank would use Lloyds’ IT system, reducing the risk of computer glitches of the kind that disrupted payments at Royal Bank of Scotland’s NatWest unit last month.
Reuters
|
 |
|
|
| NEWS UPDATES |
|
|
|
|
|
|
