NBNK and Co-op in race for Lloyds branches

By Martin Flanagan
Published on 24/11/2011 00:00

THE mutual Co‑operative Group and publicly quoted NBNK Investments have been shortlisted by Lloyds as potential buyers for the 632 branches the bank has been ordered to sell by the European Commission in return for its taxpayer bailout.

Lloyds, hit by boardroom upheaval in the past few weeks, revealed yesterday that it had received three offers for the assets and had decided to take forward talks with two bidders.

The bank did not identify them, but sources confirmed they were the Co‑op and NBNK, the latter set up under City grandee Lord Levene to jump‑start consolidation of the UK banking sector. Sun Capital, the third bidder, has dropped out.

However, Lloyds confirmed it would also continue to work on a flotation of the so-called Project Verde branch assets as a potential alternative to a direct sale. The latter is expected to raise between £1bn and £1.5bn.

It came as Tim Tookey, the interim chief executive at Lloyds following the leave of absence for stress given to his boss Antonio Horta‑Osorio this month, told MPs yesterday it was impossible to say how much City sentiment had been shaken by the recent boardroom turmoil.

Andrew Tyrie, chairman of the Treasury select committee, noted that Lloyds’s share price had fallen by 8 per cent more than the wider banking sector amid the eurozone turbulence since it was announced that Horta‑Osorio would be absent until Christmas. Fears that Horta‑Osorio, the architect of Lloyds’s recovery strategy, might not return at all were compounded when the group this week named a new interim chief executive, non-executive David Roberts, if the sick boss’s return was delayed beyond the end of this year.

Tookey told the committee; “It’s very hard to say or attribute any element of the share price reduction to management issues at Lloyds.”

The shares closed down another 2.5 per cent, or 0.55p, at 21.84p yesterday, meaning the taxpayer is currently sitting on a loss of £11.4bn.

Tookey, who is leaving in February to join insurer Resolution Group, said it was possible that part of the share price fall was more to do with bleaker prospects for the UK economy “where the vast majority of our business is”.

However, he said that the subject of Horta-Osorio’s leave of absence had been discussed “on several occasions” with UK Financial Investments, the government’s arm’s-length agency that monitors the taxpayer stakes in British banks, including the 41 per cent holding in Lloyds.

Questioned by MPs, Tookey said UKFI is “supportive of the actions that the board is taking to ensure we have adequate control of our business”.

Lloyds was further jolted this week when it emerged that Royal Bank of Scotland’s chief risk officer, Nathan Bostock, had changed his mind about joining the group as head of its wholesale banking division.

Tookey confirmed to the committee an announcement by Lloyds yesterday that it planned to lend £12 billion to UK small businesses in 2012 – the same amount that he said it was on target to have lent to SMEs in 2011.