The Co-op pulls out of Lloyds’ branch sale

Competition in the UK banking market has taken another blow with the collapse of the Lloyds' branch sale.

The Co-op has withdrawn from a deal to buy 632 UK bank branches from Lloyds Banking Group.

The branches will now be put up for sale by Lloyds and will be listed as a stand-alone bank through the stock market.

Worsening economic conditions

The Co-op said worsening economic conditions mean it’s now not the right time to go through with the purchase. It said going forward would not have been in the best interests of the Group’s members as the sale would not have delivered a "suitable return" if it had been completed.

But the sale, known as Project Verde, would have meant the Co-op becoming more of a challenge to the leading banks by having a larger presence on the high street.

If the takeover, which was first agreed last year, had gone ahead the Co-op would have had a 6% share in the UK market and inherited around 4.8 million customers.

TSB Bank

The branches in question will now be branded as TSB Bank. They will operate as a separate bank within Lloyds before the branches are sold in the form of an initial public offering. This will happen in the summer. Lloyds has said there will be no direct impact on customers.

A loss of competition

Today’s announcement is bad news for consumers as it means there will now be less competition among the banks and a few large companies will retain their hold on the market.

Peter Marks, Group Chief Executive of The Co-operative Group, said: “The Verde transaction offered a significant opportunity to The Co-operative and the sector as a whole as it would have created a major challenger bank. 

“We were, however, clear from the outset that Verde was a complex transaction and that this was not the only option open to us to develop our Bank.”

European regulators said the sale of the branches by the part-state owned bank had to go ahead before November 2013 in return for the Government bailing out Lloyds during the financial crisis.

This is because of European Commission competition rules but after today’s decision this deadline is likely to be extended.

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