Lloyds set for sale of 600 branches

By Simon Watkins for The Mail on Sunday
Updated:

 

Lloyds Banking Group is this week expected to name advisers to help in the sale of more than 600 branches that could form the core of a new High Street retail bank.

The Lloyds TSB branch in Potton

Branch sale: Lloyds is set to sell 600 of its branches

At the same time, potential bidders are already gearing up to begin talks, with the focus on the crucial question of the funding gap at the branches – the difference between the loans and deposits – which is about £40bn.

New Lloyds chief executive Antonio Horta-Osorio held meetings with banks nine days ago.

Sources suggested he may choose two to help with the sell-off.

The disposal was ordered by the European Commission in 2009 as the price for Lloyds being bailed out by the Government.

Lloyds has until 2013 to make the disposals, but Horta-Osorio has accelerated the pace of the sell-off since he arrived from Santander at the start of the month.

A memorandum on the branches on offer is expected to emerge soon after advisers are appointed, but not before the Independent Commission on Banking issues, set up by the Chancellor to investigate the industry's structure and market competition, makes its interim report on April 11.

Final recommendations are due in the autumn.

A more drastic break-up of Lloyds to encourage more competition is thought to be one of the ideas being considered.

The £40bn funding gap at the branches would have to be filled by any buyer through wholesale lending markets, which have still not returned to their full health since the credit crunch.

Renegotiating the gap by looking for Lloyds to include more deposits or reduce the mortgages and loans being sold with the branches will be key to the negotiation and sales prices.

Potential bidders include start-up finance house NBNK, Virgin Money and National Australia Bank, which owns the Clydesdale and Yorkshire banks.

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