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
PROMOTED VIDEO
News
Angelina Jolie with her father Jon Voight
people
News
Bill Kerr has died aged 92
people
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
Arts and Entertainment
Warner Bros released a mock-up of what the new Central Perk will look like
tv'Friends' cafe will be complete with Gunther and orange couch
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
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

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Test Manager - Banking - Yorkshire - £450 per day

£400 - £500 per day: Orgtel: Test Manager - Banking - West Yorkshire - £400-£5...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone