Lloyds to pick branch buyer next month

A PREFERRED bidder for the 630 branches being sold by Lloyds Banking Group could be identified as early as next month as chief executive Antonio Horta-Osorio cranks up the pace of his restructuring.

Tomorrow is the deadline for initial offers, with Sir Richard Branson's Virgin Money and banking takeover vehicle NBNK Investments regarded as certain to be among those who make it through to the second round of the Lloyds sale process.

Sources close to the auction say that has now been brought forward to later this month and that Horta-Osorio wants to whittle down the suitors to a couple of head-to-head rival buyers and have a preferred buyer by the end of August.

Horta-Osorio, who succeeded Eric Daniels as chief executive of Lloyds on 1 March, is said to be keen for actual contracts to be signed by the end of this year.

This compares with a Brussels deadline of November 2013 for the assets to be physically transferred, which include 185 Lloyds TSB branches in Scotland, 250 Lloyds TSB branches in England and Wales and 164 Cheltenham & Gloucester branches.

Also on the block is internet bank Intelligent Finance and the TSB brands. One banking analyst said: "The pace at which this sale is going shows how much Horta-Osorio wants 'closure' on this issue.

"He clearly sees it as a distraction to putting Lloyds back on its feet again after the taxpayer bailout. Obviously, from when contracts are signed it will still be ages before all the issues are sorted out. But he is also probably aware of the public relations value of being seen to be moving fast to stimulate competition on the banking high street." Lloyds declined to comment.

The Independent Commission on Banking (ICB) has said the Lloyds asset sale should be "substantially enhanced" in its initial findings last spring.

Horta-Osorio has publicly questioned whether further asset sales on top of the requirements of the EU are necessary or justifiable. The branches being sold represent 20 per cent of Lloyds' branch network and mortgage business, and would create the seventh biggest bank in Britain.

When Lloyds rescued troubled HBOS in 2008, it amassed a 34 per cent share of UK current accounts, 30 per cent of the mortgage market and 17 per cent of deposits.

Chancellor George Osborne told the Treasury Select Committee last week that he saw "no merit" in reversing the Lloyds/HBOS merger.

Both Branson and Gary Hoffman, chief executive of NBNK, have called for the auction of the Lloyds branches to be capped to speed up the transfer to a new competitor.

It is also believed Clydesdale Bank owner, National Australia Bank, is considering a bid for the branches, but it is unclear whether it is likely to make the second round of the sales process.