Co-op bank boosts high street presence
The Co-op’s long-awaited deal with Lloyds Banking group has taken a major step forward with the sealing of a Heads of Terms agreement, under which the Co-op will pay around £750m for 632 Lloyds branches.
Lloyds Banking Group was ordered to sell the branches under the terms of the bail-out it received from the government four years ago.
The latest move is being heralded as a major step towards creating more competition in the UK banking system, which has been battered by scandal after scandal since the onset of the financial crisis.
The ethical policies of the Co-op could be a major attraction for customers feeling angry and dissatisfied by the recent revelations of Libor-rate rigging by Barclays and other banks, and money-laundering by HSBC.
There have also been major technical problems at RBS Group which left some NatWest and Ulster Bank customers without access to their accounts.
The deal will increase the Co-op’s share of Britain’s network of bank branches from around four per cent to 10 per cent, giving it a total of 1,000 branches.
The CEO of the Co-op Group, Peter Marks, said: “Now we can provide a big bank, a challenger bank, that people can really trust”.
Lloyds had hoped to sell the branches for up to £1.5 million and will make a loss of the sale, although it said that this would be counterbalanced by lower capital requirements.
The enlarged Co-op bank will be led by Lloyds executive Paul Pester and will use Lloyds’ IT platforms to reduce the risk of technology problems arising.
Commenting on the deal, Chancellor George Osborne said: “This is another step towards creating a new banking system for Britain that gives real choice to customers and supports the economy”.
Currently, Barclays, Lloyds, HSBC, RBS and Santander hold 85% of the personal current account market and, together with Santander, dominate the UK banking sector.
Choice for UK customers diminished significantly in the 1990s when many building societies demutualised.
The 2008 financial crisis led to further consolidation, with many of the remaining mutuals being absorbed by bigger companies, to prevent them going under completely.