Lloyds branches saga takes twist with NBNK ‘alternative’ to Co-op

Despite losing out when Lloyds named the Co-op as preferred bidder last December, NBNK said it was offering “an alternative demerger structure” for the assets, estimated to be worth about £1 billion.

It comes amid speculation that the Co-op’s attempt to double in banking size has run into trouble with the regulators, who it is understood have questioned whether it has the boardroom banking expertise to run a much bigger bank.

Lloyds has always said a stock market flotation of the so-called Project Verde assets also remains on the table as an option if the sale to the Co-op runs into the sand.

But NBNK, which is chaired by Lord Levene of Portsoken and backed by an array of leading City institutions, said yesterday it was now prepared underwrite 100 per cent of the asset package demerger.

This would involve NBNK offering Lloyds shareholders – including the UK taxpayer which sits on a 41 per cent stake in the bank – the option of receiving cash directly and/or receiving shares in a new listed, banking group.

Gary Hoffman, NBNK’s chief executive who held the same position at Northern Rock during its turnaround in state ownership, said the resulting new group would be the only listed bank solely dedicated to retail and SME banking.

“It gives Lloyds shareholders a choice they did not have,” he said. “You can take the cash from NBNK or you can share in the upside of a new bank.

“We were disappointed [not to be named preferred bidder]. We thought it was the wrong decision. But if we were 100 per cent confident [that the Co-op deal would go through] then we would not have done this.”

It is understood NBNK have kept the Financial Services Authority informed as the latest proposal has crystallised.

A Lloyds spokesman said: “The group acknowledges receipt of a letter outlining an indicative revised proposal from NBNK. However, we continue to negotiate solely with the Co-operative Group and are continuing to prepared for a [alternative] divestment through an initial public offering.”

The Co-op said it had no comment other than to reiterate it remained in exclusive talks with Lloyds, which was ordered by the European Commission to divest the branches in return for the taxpayer bailout it received after the “rescue” takeover of HBOS in 2008.

Co-op chief executive Peter Marks said at the mutual’s annual results a fortnight ago that he could not guarantee he would pull off the deal, but suggested the situation would be resolved “within weeks not months”.

Hoffman said the NBNK alternative demerger proposal for the assets meant that it would take a lot of the pricing uncertainty out of a straightforward flotation for Lloyds shareholders. “It is never good to back just one horse,” he added.

NBNK’s statement yesterday committed to make no redundancies at the Verde business as part of any acquisition, no branch closures, and offered a sweetener to regulators saying that it would be the “first ‘no bonus’ bank with no short-term incentives for senior managers”.

NBNK’s blue-chip City backers include Aviva Investors, Bailie Gifford, BlackRock Investment Management, F&C Asset Management and JP Morgan Asset Management.