It follows an OFT review into the spin-off of more than 600 Lloyds branches to TSB, which concluded the parent group needed to strengthen the balance sheet of the new bank to enable it to grow its market share more rapidly.
Lloyds said last night it would do this mainly by transferring the “economic benefit” of £4 billion of its mortgage business to TSB in its first four years of existence. It added that it would also provide TSB with an extra one-off payment of £40m to “enable future customer acquisition and develop its branch network”.
The move came as the OFT approved the divestment of the Lloyds branches and also the ongoing sale or flotation of more than 300 Royal Bank of Scotland units.
Lloyds also confirmed last night that the Treasury believed these moves addressed the recommendations in the OFT’s review, and would be supporting an application to the European Commission for an extension to the 2013 deadline to divest the branches.
TSB is scheduled to be floated on the stock market next summer.