Lloyds Banking Group and the government were accused yesterday of acting in “bad faith” in their handling of the controversial sale plan for 632 bank branches.
Lord Levene, former chairman of NBNK Investments – which bid to buy the branches – told MPs that taxpayer-backed Lloyds was “swayed by political considerations” in its decision to sell to the mutually-owned Co-operative Bank.
However, that deal collapsed when a £1.5 billion hole was found in the self-styled “ethical” Co-op Bank’s finances that has tumbled its parent group into the majority ownership of hedge funds.
Asked by Treasury committee chairman Andrew Tyrie MP if he felt the sale process was run in bad faith, Levene replied: “Yes.”
The European Commission ordered the sale of the branches in return for Lloyds’s taxpayer bailout, and they have since been repackaged as a separate TSB bank to be floated on the stock market, possibly as early as this year.
Levene told MPs he handed the then chairman of Lloyds, Sir Win Bischoff, a paper setting out what NBNK had identified as the key risks to the Co-op bid, including financing, which were fulfilled.
Bischoff has said he does not recollect receiving such a document. But Levene said yesterday that during the bid it was pointed out to him that the Coalition agreement contained a goal to promote the interest of mutuals.
Levene, a former chairman of Lloyd’s of London, said: “I think, with the benefit of hindsight, there must have been a view that if the creation of a new challenger bank would be created by a mutual, this would be another tick in the box for the goals that had been set out.
“I have no difficulty with that, provided they were done by fair means rather than foul. In our view, they chose to concentrate on all the positive aspects of the Co-op and none of the positive aspects of our bid.
“I would say that Lloyds were swayed by political considerations. I would say that their assessment of our bid… was not done fairly.”
The former NBNK chairman said he asked Bischoff if there were any “outside influences” on the Lloyds board’s deliberations on the sale, and “he assured me there weren’t”.
However, Levene said that in a meeting on 28 May 2012 with Lord King, the Governor of the Bank of England, he was told that the NBNK bid would probably fail because “this is going to be a political decision. Your only way forward, if there is one, is to talk to the politicians”.
Levene said he regretted that the aim to create a new retail bank after larger institutions had “lost their way” had failed. He said he had lost £60,000 of his own £100,000 investment in the project while the total cost to NBNK’s backers had been about £30 million.
Gary Hoffman, chief executive of NBNK, said, by contrast with the Co-op, his group’s bid was backed by City institutions. “They were not hedge funds there to make a quick buck,” he said.
Lloyds director of public affairs, Dominic Morris, said in a separate letter to the committee that the Co-op’s final offer was “superior financially” to NBNK’s, adding: “Our belief is that the process was fair throughout.”