Project Verde bidding process was ‘not fair’, says Lord Levene

Giving evidence at the Treasury select committee, Lord Levene said the decision to sell 632 Lloyds branches to the Co-operative Bank was biased. He accused Lloyds Banking Group...

Giving evidence at the Treasury select committee, Lord Levene said the decision to sell 632 Lloyds branches to the Co-operative Bank was biased. He accused Lloyds Banking Group of yielding to political pressure, adding that the bidding process was not fair.

Lord Levene is ex-chair of banking start-up NBNK, which aimed to establish a challenger bank through the acquisition of branches from Lloyds. He alleged bad faith on Lloyds’ part, which he claimed was influenced by the government’s goal to promote the interest of mutuals – an objective included in the Coalition agreement.

“There seems to have been a view that if a new challenger bank were to be created by a mutual this would have been another tick in the box for the goals set out [in the Coalition agreement],” he said, adding that senior political figures, including business secretary Vince Cable, were backing the idea.

“I would say their assessment of our bid and the extent that was explained to their board was not done fairly,” Lord Levene told the committee, which is examining whether the sale was politically motivated.

He also claimed that former Bank of England governor Mervyn King had told him the decision to sell hundreds of branches to the Co-op Bank was politically motivated. He added he did not intend to take any legal action against Lloyds Group, because it would be difficult to win a case for bad faith.

“I’m not sure we would win too many friends if we pursued it,” he said. Lord Levene is no longer a shareholder at NBNK, but said that other investors were waiting to see the results of the hearing before deciding whether to take legal action.

Also giving evidence at the hearing, Gary Hoffman, former chief executive of NBNK, said his company’s bid was “financially superior”. According to him, NBNK would have paid between £630m-£730m upon the signing of the sale and purchasing agreement with an additional £120m invested upfront to get to completion. The Group was due to pay £350m upfront with another £400m over 15 years, dependent upon performance of business.

Lloyds told the committee that the final bid from the Group was superior from the NBNK one, both financially and in terms of execution risks. However, Mr Hoffman argued this was not the case. He said: “The judgement turned out to be flawed but it was within their rights to change the process and make a decision based on what they regard as a criteria.”

Mr Hoffman further said that leading market players at the time were aware that the execution risks with the Co-operative Bank were extremely high due to the ongoing integration with Britannia and the Group’s structure.

Lord Levene also said he did not posess enough information to say whether JP Morgan, Lloyds’ financial adviser, had acted fair, but argued the financial services company would “know the Co-op well” having advised them on the Britannia acquisition: “They [JP Morgan] said that our bid was lower and they miscalculated it.”

Responding to claims made by the Lloyds Group that NBNK had “no bank, no treasury, no clients and no infrastructure,” he said the banking start-up was a new venture, which had investors who backed it.

NBNK was the only organisation to bid in the second round in September 2011. However Lloyds Group decided to re-package it to enable the Co-op Bank into the bidding process.

“The fact that the Co-op did not meet any date that was given to them and they were given more time suggests that the process was changed to meet the Co-op,” said Lord Levene.

He added that in January 2012 he personally handed a document to Lloyds Chairman, Win Bischoff, which outlined the risks of selling the branches to the Co-operative Group. Lloyds Group said it had “no record or recollection” of the document.

Gary Hoffman also contested Lloyds’ refusal to meet NBNK’s investors. The company was backed by several large fund managers, including Aviva, Baillie Gifford, F&C and Invesco Perpetual. “They asked for comfort letters,” he said, “and we gave them. It was Lloyds that turned down meetings with our investors where they would have set out their clear intents.”

Lord Levene said he lost £60,000 of his own £100,000 investment in the project, while the total cost had been around £30m. As chair of NBNK Lord Levene earned a salary of almost £400,000 and former chief executive Gary Hoffman received £750,000.

In this article

Join the Conversation