Co-op is back in frame to snap up 632 Lloyds branches
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UPDATED:
21:01 GMT, 13 May 2012
Plans by the Co-op to
take on the might of the
High Street banking giants
could be back on track after
its ailing bid to snap up 632
Lloyds branches received a
shot in the arm.
The two companies are
understood to have put a
new proposal to the City
regulator, which would see
Lloyds continuing to run IT
systems at the Project Verde
branches.
An interim management
team at the branches –
which Lloyds was forced to
sell as a condition of taking
state aid – would transfer
with the business.
Project Verde: Lloyds was forced to sell the branches as a condition of receiving state aid
Paul Pester, the head of
the team, would become
chief executive under the
plans and the Co-op would
pay Lloyds a fee for its banking
systems. It is hoped this
arrangement will help allay
some of the Financial Services
Authority’s concerns
which helped to derail the
Co-op’s original bid.
One is that the mutual –
which is still integrating its
IT systems after taking
over Britannia Building
Society in 2009 – may have
bitten off more than it can
chew.
Another concern is understood
to be over the lack of
banking experience on the
Co-op’s main board.
The reprieve comes weeks
after Lloyds ended exclusive
negotiations with the
mutual and revealed it was
considering a new offer from
NBNK – the investment
vehicle set up by City grandee
Lord Levene to create a
new challenger bank from
the wreckage of the financial
crisis.
It also comes after failed
attempts by the Co-op to
beef up its banking credentials,
including a rebuffed
attempt to poach former
Northern Rock boss Gary
Hoffman, now heading up
arch rival NBNK.
Inside sources insisted it
was still in the running for
the deal. But the upstart
has yet to be invited back to
the negotiating table.
NBNK first has to convince
Lloyds and the Financial
Services Authority on a
number of issues, including
its ability to raise money
from investors to finance
the deal.
The outfit is currently tapping
up Middle East investors
to help back its bid
worth more than 1.5billion and
is understood to have
approached sovereign
wealth funds – including
Qatar Holdings.
NBNK will also be pinning
its hopes on the fact that
the hybrid arrangement to
save the Co-op deal does
not overcome a key concern
for both the mutual and the
regulator.
There are fears the FSA
will want to bring the entire
Co-op group, from its supermarket
to funeral business,
under the watchdog’s regulatory
framework.
This would require the
mutual to hold huge levels
of capital as a buffer to prevent
a collapse.
Spokesmen for both the
Co-op and Lloyds refused
to comment yesterday.