Economy gets blame for £750m Lloyds deal breakdown
A plan to sell more than 600 branches of part-nationalised Lloyds to the Co-op for £750m falls through, as the buyer says the economic climate is too poor.
Ahead of the latest set of UK GDP figures, due to be announced on Thursday, the Co-operative Group has backed out of the deal, saying it would “not currently deliver a suitable return for our members.”
The sale, agreed last summer and first mooted in 2011, was forced on Lloyds by the European Commission following its £20bn taxpayer bailout during the financial crisis. It was hoped the deal, known as Project Verde, would increase competition between banks.
‘Worsened outlook’
“After detailed and thorough consideration of all aspects of the Verde transaction, we have decided, at this time, that it is not in the best interests of our members to proceed with the transaction, said Co-op chief executive Peter Marks.
“Having worked closely and constructively with Lloyds we are naturally disappointed to have reached this conclusion.
“However, against the backdrop of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general, the Verde transaction would not currently deliver a suitable return for our members within a reasonable timeframe and with an acceptable level of risk.”
Lloyds, which is 39 per cent owned by the taxpayer, will now float the portfolio on the stock exchange. This will create a separate business, branded as TSB, within the Lloyds group but operating separately from it. Branches will be rebranded this summer.
‘Disappointed’
Antonio Horta-Osorio, chief executive of Lloyds Banking Group said: “We are disappointed that The Co-operative Group is unable to complete this transaction.
“However, we are well advanced in our plans to bring the Verde business to the UK high street during the summer through the TSB Bank, and will now proceed with the option to IPO (initial public offering) the business, subject to the necessary approvals.
“The TSB Bank will be an attractive retail and commercial bank that will have around 630 branches across the UK, a strong management team and will be a real challenger on the high street.”
The Verde branches have around five million customers, an estimated 9,000 employees and a 4.3 per cent share of the current account market.
Under the timetable agreed with the European Commission, Lloyds must offload the branches by the end of the year.
In March, Lloyds announced that it had made a £570m loss over 2012, but was giving its staff a bonus pot of £365m.