TSB branches sale lined up even before Brussels diktat

Published on Tuesday 3 November 2009 20:00

ARCHIE Kane, head of Lloyds Banking Group in Scotland, admitted yesterday that the bank would have disposed of some of its branches even if Brussels had not ordered it to do so.

Lloyds will be forced to sell 185 bank branches in Scotland, mainly acquired in its merger with TSB, while it can retain the 300 Bank of Scotland branches that came into the group with the acquisition of HBOS.

It will also be offloading branches of Cheltenham & Gloucester and the online mortgage bank Intelligent Finance.

Kane said in an interview with The Scotsman: "If we had retained these businesses we would without doubt have rationalised some of the branches."

He could not give a figure for the number that may have been offloaded or closed.

With buyers now likely to circle the former TSB business, Lloyds has terminated plans to integrate all its Scottish retail banking under the BoS banner. It will now run Lloyds TSB branches normally until they are sold.

He said the Lloyds TSB and C&G brands will be retained and retired and the board of Lloyds TSB Scotland kept in place for the time being.

The TSB brand and IF will be sold with their assets, though a new buyer will not have to use them.

"Previous integration plans that have affect any of these businesses will be stopped and if any integration has taken place it will be reversed," he said. "We have not integrated any of the branches."

He also dismissed repeated suggestions that Scottish Widows may be part of the disposal programme. "It was absolutely not mentioned at all," he said.

His comments came as a trading update showed new business sales in the life, pensions and investments businesses were 27 per cent lower than in the first nine months of 2008, reflecting "extremely difficult market conditions".

Lloyds was seen to have fared somewhat better in the shake-up than Royal Bank of Scotland. On the forced sale of TSB in Scotland, Kane said: "We think disposal of this part of the business is painful but in the circumstances it is reasonable and doesn't have a significantly adverse impact on the group.

"We expect to be required to prepare for sale a standalone retail banking business with a 4.6 per cent market share of the personal current account market in the UK and up to approximately 19 per cent of the group's mortgage assets."

He said the total revenue impact of the disposal programme across the UK would be 500 million.

He said there were a number of options for the assets being sold but he was not aware of any approaches for any of them. A trustee, or overseer, will be appointed by the commission to monitor the assets being put up for sale to ensure the bank complies with instructions to continue running them in a way that does not cause any deterioration.

A number of Scottish businessmen are looking at the possibility of acquiring the TSB business. Sir George Mathewson, former chairman of RBS, said: "I am familiar with the situation. I have heard about this."

He said he was not directly involved.

'Rights issue beats asset protection'

LLOYDS Banking Group's chief executive claimed the group's record rights issue and complex debt swap announced yesterday was much better than signing up to the government's asset protection scheme, writes Martin Flanagan.

Eric Daniels, who also took the wraps off a better-than-expected trading update, said the capital-raising involving 13.5 billion of fresh equity and billions of pounds of new bonds was "significantly more attractive" partly because it supported the whole of the bank's balance sheet and not just toxic assets.

He said it was less dilutive for shareholders, as the government's stake had been set to rise from 43 to 62 per cent if Lloyds joined the asset protection scheme.

Daniels said it was also clear from the European Commission that the raft of business sell-offs enforced on the bank would have been greater if it had participated in GAPS.

He indicated that such reasons were behind his efforts to keep Lloyds out of the insurance protection scheme rather than the prospect of creeping political control of the bank.

Daniels said he was interested most in increasing shareholder value. "Frankly, we could not care less about politics," he said.

It came as Sir Win Bischoff, chairman of Lloyds, supported the chief executive, who has received strong criticism for the takeover of HBOS last year.

Bischoff said the acquisition should be judged in three years time, and that Daniels was the right man to implement the integration. "My own view is, very simply, that Eric is going to be around for quite some time", Bischoff said.

Analysts said the apparent better City reaction to Lloyds's statement yesterday, compared to that from rival Royal Bank of Scotland, was partly due to the accompanying relatively positive trading update.

In this Lloyds said bad and doubtful debts had slowed in the third trading quarter and as a result it expected them to fall significantly in the second half of 2009 compared to the first half of the year.

Lloyds said net interest margin – the difference between what it pays on deposits and charges on loans – had stabilised in Q3, and that there had been "good revenue growth".

The bank also said that costs in the nine months to end-September were 2 per cent lower than in the equivalent period.