Lloyds denies Co-op deal pressure
Lloyds Banking Group bosses denied political pressure to accept the Co-operative Bank's ill-fated £700 million bid for its branches today, insisting they acted in the best interests of shareholders.
In a hearing with MPs over the collapse of the branch deal, Lloyds chairman Sir Win Bischoff said there was "no political interference or contact" surrounding the decision to choose the Co-operative over the two other final bidders.
The Co-op pulled out of the branch takeover in April over fears about the strength of its banking arm's balance sheet, shortly before ratings agency Moody's downgraded it to junk status and warned it may need taxpayer support.
Moody's delivered another blow to the Co-op Bank today, slashing its rating on the group again following yesterday's details of its aims to plug a £1.5 billion hole in its finances, citing doubts over the group's plans.
Sir Win and Lloyds chief executive Antonio Horta-Osorio revealed they discovered a capital shortfall at the Co-op in December 2012 and were "sceptical" it could be plugged in time for the branch sale to complete as scheduled in March.
But they said they decided to give the Co-op more time, given its assurances the deal could still be done.
MPs on the Treasury Select Committee grilled the Lloyds chiefs amid concerns of political interference over the decision to choose the Co-op over rival bidders, investment group NBNK and Sun Capital.
Lord Levene, who chaired the NBNK bid, claimed in a written statement there had been "significant political involvement leading up to the original decision" in favour of a bid from a mutual.
He added he was advised the decision was "based on an indication from senior politicians within the Coalition that the Co-op deal was to be the preferred and definitive solution".
Mr Horta-Osorio said the Government had only indicated its preference for the mutual model after it had announced its decision to sell the 632 branches to the Co-op.
Sir Win told MPs the only factors considered by the board in the bidding process were the financial aspects of the deal and the ability to execute.
The Lloyds bosses revealed the Co-op's offer was higher than NBNK's £630 million bid.
Lloyds, which has to divest the branches as an EU condition of state aid, will instead float the branches on the stock market under the TSB Bank brand following the Co-op bid's collapse.
The deal would have transformed Co-op Bank into a major customer-owned rival to the big four high street banks, creating a lender with almost 1,000 branches and 11 million customers.
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