Lloyds Banking Group is close to offloading 632 of its branches at a bargain price to the Co-operative Group, according to newspaper reports.
The Financial Times (FT) reports that hopes the part-nationalised lender would pocket around £1.5bn for the branches have gone up in smoke. According to the FT the eventual price tag will be no higher than £1bn, with a much-lower upfront fee which will be supplemented by additional payments from the Co-op if the sold business performs well enough to trigger them.
Lloyds is obliged to sell a large number of its branches after the ill-fated acquisition of HBOS gave the combined group a dominant position in the UK mortgage market which, on top of the £21bn bailout it received from the government, was too much for the European Union's regulators to stomach.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"The Co-op's board is due to meet early next week to finalise and approve the deal. People close to the process said details of the agreement were likely to be released shortly after that," the pink 'un (FT) reported.
On June 27th, Lloyds revealed that it made considerable progress with the Co-op on the Verde transaction - Verde being the project name Lloyds has assigned to the sale of the branches.
The bank said the two parties had an understanding on the commercial terms for the transaction and were working on the documentation.
That announcement appeared to kill off any hope of NBNK Investments getting its hands on the branches, prompting NBNK to announce it is abandoning its plans to establish itself as a national High Street lender.
"With no other UK banking assets available for sale that would meet our strategic objectives, we feel that we have no choice but to close up," a statement on the group's web site said.
Lloyds' Verde business has 632 branches across the UK with around 5m customers, representing 6% of the UK branch network. When combined with the Co-op business, it will have some 7% of UK current accounts.
JH
