Lloyds Banking Group will now progress more detailed exclusive discussions with The Co-operative Group, with the aim of agreeing heads of terms by the end of Q1 2012. The Group will continue to progress an Initial Public Offering (IPO) during this phase of the discussions.
Tim Tookey, Interim Group Chief Executive and Group Finance Director, said:
"We are pleased to be reporting progress with the Verde divestment which continues to move forward in line with our expectations. I am confident that we will complete the transaction by the end of November 2013, in line with the EC mandated timescale."
This is subject to regulatory approval.
Peter Marks, Group Chief Executive of The Co-operative Group, said:
"We have a clear strategy for driving The Co-operative Group forwards. As part of that we have been working to build upon our strong foundations in banking to ensure customers have a real alternative on the high street.
"We are a people's bank - mutually owned, with profits shared between members and also used to invest for the long-term.
"Our interest in the Lloyds Banking Group's branch assets needs to be seen in this context. We think a combination of these branches and our own would significantly strengthen our position as a real challenger in relationship banking in the UK.
"Clearly our bid for the assets is non-binding and we would only proceed if we could reach an agreement that was in the interests of our members and other stakeholders. At the same time, acquisition is not the only route we have for growing this business.
"Our bank has continued to go from strength to strength following the merger with Britannia and we are pushing further through initiatives such as our in-store banking programme.
"We are, however, pleased to have been granted preferred bidder status and look forward to working with Lloyds to try to reach agreement."
Peter Vicary-Smith, Which? chief executive said:
"If people are to get a better deal from their banks we need greater competition, which means an effective challenger on the high street. People tell us they like the Co-operative bank and we think they can teach the other banks a lesson in good customer service.
"However, even after the branch sale, Lloyds will still be left with a dominant position in major retail banking markets and is likely to use its market power to increase prices for consumers.
"If Lloyds will not agree to enhance the size of its divestment, then an early reference to the Competition Commission may be the only way of securing further improvements."
Sarah Brooks, Director of Financial Services at Consumer Focus said:
"The sale should be good news for consumers - we need a thriving retail banking sector offering a mix of banks, mutuals, credit unions and Post Office banking.
"But for big to be beautiful for customers, the Co-op must provide good value products and great customer service. This is an opportunity to inject some much needed innovation and competition into our retail banking sector."
