Lloyds sells 632 branches to Co-operative Group

 

The Co-operative Group today hailed its deal to buy 632 Lloyds Banking Group branches for up to £750 million as “the biggest shake-up in high street banking for a generation”.

The group said it will become a "new challenger" in British banking after announcing the long-awaited agreement, which will triple the size of its banking arm to nearly 1,000 branches and increase its share of UK branches to around 10%.

It is seen as a cut price deal for the Co-op, with the group agreeing to pay Lloyds - which is 40% owned by the Government - £350 million upfront and a potential further £400 million by 2027.

However, the price tag is far short of the £1.5 billion first mooted.

Part-nationalised Lloyds admitted it would suffer a loss on the sale, although it said this would be offset by a fall in the amount of capital it has to hold on its balance sheet.

The Treasury welcomed the announcement, which it said formed part of a raft of measures to reform the banking system and improve competition.

The deal will transform the Co-op into a major player in British banking, bringing around 4.8 million customers to the mutual, meaning the combined business will see its share of the current account market soar from around 2% to nearly 7%.

Five years ago, the Co-op had just 90 banking branches.

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

"The sale of hundreds of Lloyds branches to the Co-operative creates a new challenger bank and promotes mutuals.

"This follows the sale of Northern Rock to Virgin Money in January and represents another important step towards a more competitive banking sector."

Around 8,000 staff are expected to transfer with the deal, including around 3,000 support staff in call centres and administration sites, and the Co-op said it aimed to retain employees.

David Fleming, national officer for trade union Unite, which represents staff at both banks - said: "This brings to an end a long period of uncertainty for the staff, who will welcome the clarity this decision will bring."

Lloyds said there would be no changes for the 4.8 million customers affected by the deal until next year.

It will communicate with all its customers about the changes and clients of the branches being sold will be given the chance to transfer to the Co-op or remain with Lloyds.

Lloyds said it will provide more clarity on the process once the deal has been finalised.

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

But he added it was a "fair price" reflecting the current conditions in the banking sector and stressed the taxpayer will share in the future profits of the enlarged bank under terms of the deal.

He said: "This deal would deliver the biggest shake-up in high street banking in a generation.

"It would be a great deal for customers because it would make the services of our member-owned, customer-led, ethically-driven, bank available to millions of people we've not been able to serve up until now."

Today's announcement comes after lengthy talks and mounting speculation that the deal was on the rocks.

Lloyds, which is offloading the branches to meet European Union rules on state aid following its Government bailout, chose the Co-op as its preferred bidder in December.

But the sale plans suffered a series of delays and initial hopes to sign a deal by the end of March were dashed due to protracted talks with regulators.

Some assets originally expected to be included in the deal have also been dropped, such as the Intelligent Finance business.

It is understood Lloyds will now be forced to close the IF internet banking business, as it was earmarked to go as part of divestments to appease the EU.

The Co-op denied reports that the Financial Services Authority (FSA) had been concerned about governance at the mutual.

Paul Pester, who was promoted by Lloyds to head the branch business known as Verde, will become the new chief executive of Co-op Banking, replacing acting chief executive Barry Tootell.

It is unclear what position Mr Tootell will take on, but he is expected to remain after the deal completes.

The management team at Verde is also due to transfer over to the Co-op, while Lloyds has agreed to underwrite the debt Co-op will sell to pay for the deal and will let the Co-op use its IT platform for the branches.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said today's announcement comes after a "long and arduous journey".

He added: "A conclusion of the sale is to be welcomed. Management focus on running the bank is strengthened and the removal of the Government as a major shareholder is now likely to receive greater emphasis."

The deal, which is expected to complete by the end of November 2013, is also seen as good news for retail customers and firms.

John Walker, national chairman of the Federation of Small Businesses, said: "This is good news. With four in 10 small firms refused credit by the main high street banks, this challenger bank will open up competition and should help small firms access the cash they need."

But the Co-op must use its status to provide a "real alternative to other banks with a focus on straightforward products and excellent customer service", according to Sarah Brooks, director of financial services at Consumer Focus.

PA

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
News
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'