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
News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballStriker in talks over £17m move from Manchester United
Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
PROMOTED VIDEO
Sport
footballFeaturing Bart Simpson
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
News
i100
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
ebooksAn unforgettable anthology of contemporary reportage
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
The eyes have it: Kate Bush
music
News
i100
Life and Style
tech

Apple agrees deal with Visa on contactless payments

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

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

.NET Developer

£650 per day: Harrington Starr: .NET Developer C#, Win Forms, WPF, WCF, MVVM,...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor