Virgin goes on the attack over moves to increase Lloyds sell-off

VIRGIN Money is ramping up opposition to any attempt to force Lloyds Banking Group to sell more branches than the 600 already scheduled, saying it may slow down the sale and hinder fresh competition.

The Edinburgh-based bank is said to be concerned about recommendations by the Independent Commission on Banking (ICB) that Lloyds should sell more assets.

The European Commission ordered the sale of 600 branches by 2013 in return for government support that left the taxpayer with 41 per cent of the group.

But Sir John Vickers, the chairman of the ICB, raised the prospect that Lloyds could be subject to a referral to the Competition Commission if it fails to "substantially enhance" the sell-off.

Virgin Money, which opened in Edinburgh in 2009 and has just under 100 staff, is interested in buying Lloyds' branches as part of its drive to expand and inject new competition into the industry.

But the group, part of Sir Richard Branson's empire, is worried that the ICB suggestion that the Lloyds sale should be increased - possibly to 900 or 1,000 branches - could delay the sale and disrupt efforts to revitalise the sector.

An industry source said Virgin was understood to believe the 600 branches would be an "excellent fit" with its business, but forcing buyers to take on more could be counter-productive.

It would have a look at buying more than the 600 branches proposed, but believes the current plan is sensible and sufficient.

"What Virgin is saying is that it doesn't believe expanding the divestment package will necessarily increase new competition on the high street," the source said.

"What is important is to get on with this quickly and get a new competitor in banking into the public arena."

A Virgin Money spokesman said 600 branches was "a healthy number".

He added: "What we're saying is let's get on with the process and see if we can provide competition more quickly. If they decide to delay, I'm not sure what you would get out of that."

The disposal of the branches includes 185 Lloyds TSB branches in Scotland, 250 Lloyds TSB outlets in England and Wales and 164 Cheltenham & Gloucester branches, as well as Lloyds' online operation Intelligent Finance.

Other potential buyers are believed to include NBNK Investments, a banking consolidation vehicle set up by Lloyds of London chairman Lord Levene and other City grandees, and Australia's NAB, which owns Scotland's Clydesdale Bank.