Back in July 2012 it was announced that Lloyds TSB was to sell 623 branches to the Co-operative bank along with 4.8 million customers which included about 100,000 business banking customers.
If you’re a Lloyds customer and didn’t want to become a Co-operative bank customer then there’s good news for you. The Co-op has taken another look at the prospects for growth in the currently worsened outlook for economic growth and that combined with increased regulatory requirements in the finance sector has convinced them to pull out of the deal.
The reasoning is pretty simple – if you’re profits are going to be small due to the current economic situation why would you want to saddle yourself with another 632 branches none of which would be making stellar profits for the foreseeable future? It doesn’t make sense to increase your exposure and double the size of your business with the economy at best growing slowly and at worst possibly contracting.
This does of course leave Lloyds Banking Group with a problem. They’re obliged to divest the TSB and Cheltenham and Gloucester brands to increase competition between banks by the European regulators, but no one wants to buy them. It’s not just Lloyds that need to sell, late last year Santander scrapped a deal to buy 316 RBS branches.
There are too many bank branches up for sale and not enough buyers. Lloyds will likely no proceed to float the so called Verde business though an IPO, although just who will be interested in buying shares in what will become a new standalone bank is yet to be seen.
For those customers who were facing the prospect of being sold to The Co-Operative Bank the immediate future is no change, but in the longer term no one knows who they might end up banking with but the one thing that’s certain is that it won’t be Lloyds.
The one other certainty is that having invested millions of tax payers money to save the banks the prospects of seeing a return of the money, let alone a profit, is far away in the future.
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A thought, Base rate @ 0.50% for the next 5 years [maybe + that], wonder what the odds are??
When this deal was first floated there were many who felt that it did not make sense. The Co-op Bank would be going from a relatively small Bank operating on relatively simple basis straight into the Big League. It had very few Bankers involved at the higher levels and was sure to attract a lot of interest from the Regulators…and it did. On top of that the asking price for the branches and customers was felt to be high..and so it has proved.
So it is very sensible for the Co-op Bank to pull out. However there is no reason why in the future some modified deal might not be worked out at a considerably lower price.
But of course it leaves Lloyds with a problem. It has to sell the branches and customers otherwise it will cause major problems with the EU over the massive bail out it got from the British Government(or rather the British People because Governments do not have money of their own..they just spend our money(often waste it) in vast quantities.
So look out for future announcements on this front. There are sure to be further chapters in this saga.