Lloyds Banking Group has agreed a deal to sell 632 of its branches to the Co-operative Group, it was announced this morning (19 July).
The British bank revealed today it will receive an initial payment of £350 million ($548 million) for the Lloyds TSB and Cheltenham and Gloucester premises from the Co-op mutual, followed by a further £400 million depending on the expanded bank's future performance.
The transaction - which is scheduled to be completed by November 2013 and has long been in the running under the 'project verde' code name - means the Co-operative will have approximately 1,000 bank branches across the UK and a total customer base of 4.8 million. The deal should make it a serious contender to challenge the monopolistic power of the existing big four banks in the UK - the HSBC; RBS/NatWest; Lloyds Banking Group/Halifax; and Barclays.
The Co-op group's share of bank branches in Britain will rise to around ten per cent once the deal is completged next year, while some seven per cent of the population's current accounts will also be maintained by the bank. The sell-off by Lloyds Banking Group has been insisted upon by European regulators as a quid pro quo for the state aid the bank got to ensure its survival after taking on the troubled Halifax/Bank of Scotland (HBOS) estate during the height of the financial crisis in 2008.
As Antonio Horta-Osorio, chief executive of Lloyds, said: "Today's agreement is an important step in meeting our obligations under the mandated sale of our branches."
“The Co-op’s vision of creating a ‘significant competitor’ on the high street will likely shake things up in the UK retail banking sector," said Ian Goldsmith, a solutions architect at the vendors Axway. "Consumers have lost a lot of trust in banks over the last few years, meaning the enlarged bank can’t afford an IT integration cataclysm. Providing accurate information to customers and avoiding system outages is the crux of any successful IT integration.
“IT integration projects can quickly become like adding oil to water, if the right approach and platform is not mastered early on. The focus of moving the Co-op’s customers onto Lloyds existing infrastructures, must be a 'start anywhere, use anything' model. The focus and IT strategy must be customer-centric.
“The enlarged banking group needs to take a carefully considered approach to anything that involves its mission critical systems, especially those that deal with customer data. Skilled support and consultancy will be required to ensure that consumer trust is gained and maintained throughout what will be a long integration process.”
By Asim Shah and Neil Ainger