Lloyds investors count the cost of cut-price branch deal with Co-op

Bank's shareholders take a £750m loss on the sale, as one analyst says: 'Frankly, this is daylight robbery'

Shareholders in the troubled Lloyds Banking Group took a further blow yesterday when the company finally offloaded 632 of its branches to the Co-op – for £1.25bn less than it once hoped.

The sale, codenamed "Project Verde", will bring in just £350m to Lloyds upfront, with a further £400m possible depending on performance, and that only over the next 15 years.

The amount is less than half that first mooted a year ago, when the Co-op was just one of several potential bidders – the others included NBNK and Virgin Money.

The terms left City analysts noting that the taxpayer, who owns 40 per cent of Lloyds, may have lost out.

Lloyds is taking a loss of around £750m on the sale, which was ordered by EU regulators in the wake of its purchase of HBOS.

David Buik at BGC Partners said: "If I was a Lloyds Bank shareholder, I would be incandescent with rage.

"The Government should have insisted on a 'full and fair' price for this transaction – and this derisory amount of largesse is clearly not, despite bank values having fallen significantly from five years ago.

"Frankly, this is daylight robbery."

Lloyds shares, well over 500p before the financial crisis, were yesterday steady at just 30p. The taxpayer took its stake in the distressed bank at a price of 73p in 2009.

NBNK, a venture which was set up by Lord Levene and run by Gary Hoffman, the man who ran Northern Rock after it collapsed, had no comment on yesterday's deal.

Banking industry sources, however, say NBNK had offered £800m in cash for the business as well as other elements. At one point a deal worth £2 bn was mooted, money that Lloyds would have found useful.

City analysts say it could have to pay out £1.5bn over allegations it was involved in the manipulation of Libor.

Peter Marks, group chief executive of the Co-op, said he had driven a "good deal" for his members.

The Co-op is now promising to lead the biggest shake-up of high street banking for decades. It pledged to "bring back trust" to the industry.

The deal takes the Co-op's total branches to almost 1,000 and increases its share of the UK personal banking market from 1 per cent to 7 per cent.

It gets 4.8 million Lloyds customers in the process, who may become members of the Co-op if they wish.

Mr Marks says that banking's traditional players are tarnished by "horrendous scandal".

"We are already seeing a massive increase in people wanting to put their money with us," he said. "We are different. We are owned by our customers, not driven by short-term profit. We are not looking over our shoulder at the share price. We have social goals, social responsibility."

He said the aim is to develop a "boring, utilitarian kind of bank.

"We are not at the racy end," Mr Marks added.

"We don't support profits by taking risks in the market."

The Financial Services Authority has still to formally approve the deal, but it is assumed that earlier concerns about management and systems have been assuaged.

Lloyds' own IT platform will be used, which should reduce the risk of the migration of accounts to the Co-op being problematic.

Co-op will use the TSB brand initially, with Verde chief executive Paul Pester staying to run the combined business.

Ian Gordon at Investec Securities said the deal at least allows Lloyds to move on.

"The mandated Project Verde disposal has been an albatross around the necks of Lloyds' management ever since the EC state-aid sanctions were first announced."

The Chancellor, George Osborne, welcomed the deal.

"This is another step towards creating a new banking system for Britain that gives real choice to customers and supports the economy," he said.

Lloyds group chief executive Antonio Horta-Osorio said: "In agreeing to move ahead with the Co-operative we provide greater certainty for our customers and for our shareholders."

Added Mr Marks :"What the banking industry needs is to bring back trust. We've seen over the last few years, and particularly over the last few weeks, trust has deteriorated in big banks."

The upfront, £350m is being funded through the sale of Co-op debt, bonds that are being underwritten by Lloyds.

The deal is expected to be completed by the end of November 2013.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Life and Style
tech
News
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
film
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
News
Ruby Wax has previously written about her mental health problems in her book Sane New World
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas