Lloyds branch float plan ‘ditched’ in favour of sell-off

LLOYDS Banking Group is understood to have privately ditched plans to float its 632-branch business and other assets which was talked up as an alternative to a sale.

It is believed that Lloyds chief executive Antonio Horta‑Osorio and his advisers, led by investment bank JP Morgan, have decided that a sale is now inevitable as the eurozone debt crisis and gloomy macro economic outlook have made a flotation of the assets – dubbed “Project Verde” – a non‑runner.

They have also noted the decision by Santander to postpone the flotation of its UK arm until 2013 at the earliest.

Lloyds has to divest its branches, including 185 Lloyds TSB branches in Scotland, by November 2013.

City analysts have always thought a straightforward sale of the branches was the bank’s favoured option, and advisers to Lloyds kept the float option open to drive up the prices offered by the three shortlisted bidders. These are banking consolidation vehicle NBNK Investments, the Co‑operative Bank and financial investment group Sun Capital.

NBNK is the only one of the three to have met the initial “soft” deadline of 30 September for submitting an indicative offer, believed to be about £1.5 billion.

But it and its rival bidders are understood to have held off paying top dollar for the assets partly because they recognise that the ongoing stock market volatility would render a flotation undesirable.

Ian Gordon, banking analyst at Evolution Securities, said: “A flotation for Verde does not stack up. There is not the risk appetite in the market for it. The eurozone problems make the climate for having a banking float extremely unattractive.”

A source close to the sale talks said: “A market float of the Verde branches would be a failed sale, simple as that.”

A Lloyds spokesman said: “The divestment of the branches remains a dual‑track process, covering sale and possible flotation.”

Lloyds has instructed its long-standing lawyers Linklaters to act on the sale, with global head of corporate Jeremy Parr, the firm’s relationship partner for Lloyds, taking the lead, alongside partners Matthew Bland (corporate) and Carson Welsh (capital markets).

Some believe the sorry state of financial markets is also undermining potential plans from the Co-op.

“The Co‑op has no shareholders, and so would be wholly dependent on debt finance for a deal with Lloyds,” one insider said.