Lloyds to fire warning shot against forced sale of branches

Published on Thursday 14 April 2011 11:32

LLOYDS Banking Group is set to argue that if it is forced to divest hundreds more branches on top of the 600 ordered by the European Commission it could backfire on Britain's hard-pressed mutual sector.

It is believed Lloyds will outline the "unintended consequence" to competition in its ongoing consultation with the Independent Commission on Banking. The ICB said in its interim findings last week that the bank's divestiture programme should be "substantially enhanced" given its domination in areas such as current accounts and mortgages.

Analysts believe this could mean Lloyds will have to sell an extra 200 to 400 branches.

However, the bank is expected to argue behind closed doors that even selling the minimum 600 branches will create a player as big as Nationwide, the UK's biggest mutual and seventh biggest financial organisation.

It is thought Lloyds believes this would further squeeze the rest of the mutual sector, which has been particularly badly hit as savers have paid in far less in the downturn.

One banking source said: "If the commission's recommendations led to an extra few hundred branches being sold it could damage the mutual sector. It would create a new financial player bigger than all the other mutuals, apart from Nationwide, put together. That could damage the smaller mutual players and lead to even more merger action in the sector."

Last night Lloyds declined to comment.

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