Lord Levene to front new banking group

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The Independent Online

The chairman of Lloyd's of London, Lord Levene, has agreed to front the latest prospective new banking group which has a flotation scheduled for the end of the month.

The organisation, codenamed "Project New Bank", has received pledges of support from investors including F&C Asset Management, Aviva and Invesco which will back an attempt to take over one or both of the new banking groups set to be sold within the next couple of years. Lloyds Banking Group has to sell about 600 branches to satisfy EU competition regulators, while the state-owned Northern Rock is expected to be put on the block at some point.

However, Project New Bank will face tough competition. A number of organisations set up recently have pledged to form new retail banks. But the only remaining bidder for the 300 Royal Bank of Scotland branches being sold is the well-established Banco Santander of Spain, which is set to combine them with its existing UK operations ahead of a partial flotation.

There is no timetable at present for a sale of the Lloyds branches or Northern Rock but it is understood that "Project New Bank" will seek a small deal in an attempt to secure a banking licence before a second fund-raising when a bid target becomes available.

Its potential rivals for the forthcoming sales include Virgin Money; the National Australia Bank, which owns the Clydesdale and Yorkshire Bank in the UK; and the private equity firm Blackstone with the Wellcome Trust. Other new banks seeking a foothold in Britain include Metro Bank, a start-up venture led by the US entrepreneur Vernon Hill, and Walton & Company, a business-focused lender backed by the stockbroker Panmure Gordon.

"Project New Bank" has the support of Sir David Walker, who led a review of banking governance. The Treasury is thought to have been briefed. The project has not yet said how much it will raise but it will first join the junior AIM market before stepping up to the full list if it succeeds with a bid. Pledges of funding are said to have been secured but sources were unable to say how much.

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