We were not leaned on over branch sale, says Lloyds
Wednesday 19 June 2013
The bosses of Lloyds Banking Group have denied that they were told by politicians to favour the sale of more than 600 branches to the Co-op over rival bidders.
That deal collapsed last month, leading to the exposure of a £1.5bn black hole at Co-op Bank.
Sir Win Bischoff, chairman of the bailed-out Lloyds, told Treasury Select Committee chairman Andrew Tyrie that he "absolutely" denied that political pressure had played any part in the sale decision. He said: "There was no political pressure."
However, this contradicted the evidence of Lord Levene, the former chairman of the main rival bidder NBNK, who said: "My attention was drawn to a section of the Coalition Agreement indicating the desire to promote the interests of mutuals in the Financial Services Industry. I was therefore advised that the decision was based on an indication from senior politicians within the Coalition that the Co-op deal was to be the preferred and definitive solution."
Chief executive of Lloyds, Antonio Horta-Osorio, said that, while he had had "regular meetings" with Treasury ministers, they had not expressed any preference over the bidders. He said: "It was well-known the Government favoured the mutual model and so favoured the Co-op deal. However, that was not expressed to me before we chose the Co-op."
Sir Win said: "There was no preference expressed to us by govern-ment ministers. They said they were pleased that it had gone that way when we selected the Co-op."
Mr Horta-Osario told MPs that the bid from NBNK, which he said was worth £630m against the Co-op's bid of £700m, had greater execution risks than the Co-op's bid. He said: "There was no certainty that NBNK even had the funds ready and its bid was not underwritten. It also had no treasury, no bank and no customers."
He added: "NBNK should have made a better offer. They were allowed to make five bids but their best offer was only half the book value of the assets. The market value of banking assets has more than doubled since then. They should have been prepared to pay a premium, because they could have been sitting on a very nice profit today."
Mr Levene said that NBNK had sent the board of Lloyds a letter in January 2012 which outlined in detail why "we believed... there was a significant risk that the Co-op acquisition would fail."
But Sir Win said: "NBNK's bid was slightly lower than the Co-op's but the execution risks were higher."
Lloyds revealed that, although it had received 42 approaches when it put the branches up for sale, it received only three bids.
Mr Horta-Osorio said that the taxpayer could actually make more money eventually because of the collapse of the Co-op bid when Lloyds floats the 632 renamed TSB branches on the stock market next year.
Sir Win added that this so-called Plan B had always been running alongside the potential sale of the Verde branches. He said: "Europe has not yet approved it but is aware of our Plan B."
The European authorities had ordered Lloyds to sell the 632 branches by the end of this year because it received the £20bn state bail-out. But it is expected the bank will be given an extension to float the branches.
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