Co-operative Group is preferred bidder for Lloyds TSB branches

Lloyds Banking Group has announced that the Co-operative Group is its preferred bidder for 632 Lloyds TSB branches.

Under European Union competition rules, the state-rescued bank had until the end of 2011 to sell 632 of its branches. 

The Co-operative Group has been granted preferred bidder status in the process currently being run for the sale of the Lloyds Banking Group branch assets.

A statement from the Co-operative Group said: "There can be no certainty that a transaction will be completed or the terms on which it might be concluded. Any transaction would be subject to regulatory approval. Further announcements will be made as appropriate."

Peter Marks, Group Chief Executive of The Co-operative Group, said: “We have a clear strategy for driving The Co-operative Group forwards. As part of that we have been working to build upon our strong foundations in banking to ensure customers have a real alternative on the high street. We are a people’s bank – mutually owned, with profits shared between members and also used to invest for the long-term.

"Our interest in the Lloyds Banking Group’s branch assets needs to be seen in this context. We think a combination of these branches and our own would significantly strengthen our position as a real challenger in relationship banking in the UK.

“Clearly our bid for the assets is non-binding and we would only proceed if we could reach an agreement that was in the interests of our members and other stakeholders. At the same time, acquisition is not the only route we have for growing this business. Our bank has continued to go from strength to strength following the merger with Britannia and we are pushing further through initiatives such as our in-store banking programme. We are, however, pleased to have been granted preferred bidder status and look forward to working with Lloyds to try to reach agreement.”

In an interview with Co-operative News, the Co-operative Banking Group's Chair Paul Flowers revealed his thoughts behind the potential purchase. He said: “The overarching strategy is still to offer a compelling co-operative alternative. That means we have to punch above our weight and make certain we achieve better scale — because a bank which currently has two per cent of the domestic market of the United Kingdom — albeit with a bunch of really lovely customers who value what we do, and who value the bank’s services, and, in particular, a bunch of institutional customers, local authorities and others, who know we are a good bank — still is insufficient scale.

“If we are really going to offer a ‘co-operative alternative’, we need to achieve much greater scale, which is why the prospect of making a bid for the Lloyds TSB carve-out is quite crucial. We have had to weigh-up — and are still weighing-up — the pros and cons of that possible deal."

Mr Flowers also rejected the suggestion that bidding for Lloyds — which would multiply the size of the banking operation, potentially giving the Co-operative Group a seven per cent market share — is an all or nothing throw of the dice. “We are not betting everything,” he insisted. “When you see the things that you will eventually see, you will see that it is not betting everything. Far from it, in fact. It requires investment, but nothing like the scale of investment that has been speculated about in the financial press.”

That is not to say that the bid is risk free for the Group. “There are always risks. In terms of the financing, it carries some risk. You never get anywhere in developing that sort of business unless you take some risks. If you look at co-op models in different parts of the country or the world, co-ops that have never taken any risks are mainly dead and buried."

He added that co-operatives have to take risks to succeed: “But the co-ops that have taken risks in order to develop the model and develop the business are the ones who get the prize of sustaining and developing their business. So, of course you must take some risks, but you must quantify it and understand what it is. That is what we are trying to do.”