Belfast Telegraph

Saturday 25 October 2014

Co-op eyes market here after Lloyds takeover deal

Lloyds famous black horse logo will disappear from hundreds of branches in the UK after the deal

The Co-operative Group could increase its retail banking presence here after completing an audacious takeover of 632 Lloyds Banking Group branches.

The takeover doesn't initially impact on the high street banking offering as there are no Lloyds branches in Northern Ireland, but the Co-operative Bank is understood to be looking to expand.

It currently has only one branch in the Province - in Donegall Square in Belfast - and is said to have looked at expanding its banking offering in the past.

The deal with Lloyds, worth £750m, gives the Co-op a strong presence in Scotland where it currently has four branches and fits with its plan to become a "new challenger" in British banking.

The purchase will triple the size of its banking arm to nearly 1,000 branches and increase its share of UK branches to around 10%.

It is seen as a cut price deal for the Co-op, with the group agreeing to pay Lloyds - 40% owned by the Government - £350m upfront and a potential further £400m by 2027.

Part-nationalised Lloyds admitted it would suffer a loss on the sale, although it said this would be offset by a fall in the amount of capital it has to hold.

The Treasury welcomed the announcement.

The deal will transform the Co-op into a major player in British banking, bringing it around 4.8 million customers, meaning the combined business will see its share of the current account market soar from around 2% to nearly 7%.

Five years ago, the Co-op had just 90 banking branches.

Around 8,000 staff are expected to transfer with the deal, including around 3,000 support staff in call centres and administration sites, and the Co-op said it aimed to retain employees.

David Fleming, national officer for trade union Unite, which represents staff at both banks - said: "This brings to an end a long period of uncertainty for the staff, who will welcome the clarity this decision will bring."

Lloyds said it will communicate with all its customers about the changes and clients of the branches being sold will be given the chance to transfer to the Co-op or remain with Lloyds.

Peter Marks, group chief executive of the Co-op, said he had driven a "good deal" for its members. But he added it was a "fair price" reflecting the current conditions in the banking sector and stressed the taxpayer will share in the future profits of the enlarged bank under terms of the deal.

The announcement comes after lengthy talks and speculation that the deal was on the rocks.

Lloyds, which is offloading the branches to meet EU rules on state aid following its Government bailout, chose the Co-op as its preferred bidder in December.

But the sale plans suffered a series of delays and initial hopes to sign a deal by the end of March were dashed due to protracted talks with regulators.

Some assets originally expected to be included in the deal have also been dropped, such as the Intelligent Finance business.

It is understood Lloyds will now be forced to close the IF internet banking business, as it was earmarked to go as part of divestments to appease the EU.

The Co-op denied reports that the Financial Services Authority (FSA) had been concerned about governance at the mutual.

The deal, which is expected to complete by the end of November 2013, is also seen as good news for retail customers and firms.

John Walker, national chairman of the Federation of Small Businesses, said: " With four in 10 small firms refused credit by the main high street banks, this challenger bank will open up competition and should help small firms access the cash they need."

632

The number of branches the Co-op Group bought from Lloyds yesterday£350m

The up-front amount that the Co-op will pay to Lloyds for the branches

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