Says Co-op still its preferred bidder for the 632 Verde branches
Lloyds Banking Group has ended its exclusivity agreement with the Co-operative Group over the sale of 632 branches.
The Co-operative Group entered into exclusive talks with Lloyds in December of last year to buy the branches.
Although details of the bid were not made public, the Co-op's bid was believed to have have topped the £1.5 billion valuation of the branches from the only other bidder, NBNK Investments.
Today, Lloyds said it will now consider entering talks with other bidders for the branches, which Lloyds is being forced to sell under the Project Verde agreement to meet European Union state aid rules after receiving £20 billion in taxpayer backed bailouts in 2008.
Lloyds said in a statement today: "The group continues to have productive and meaningful discussions with the Co-operative Group, its preferred buyer for the Verde business.
“However, LBG (Lloyds Banking Group) is no longer holding these discussions under an exclusivity agreement.
"Given the renewed interest in the Verde business shown by NBNK, LBG will now consider detailed discussions with other parties but only once LBG is satisfied that any proposal is likely to achieve the appropriate regulatory clearances and offers greater value and/or certainty to LBG shareholders against its alternative option of an initial public offering."
Lloyds, which is 42 per cent taxpayer owned, has until November 2013 to complete the sale.
NBNK, a new banking vehicle set up by former Lloyds of London chairman Lord Levene, was the only serious rival bidder until the Co-op bid.
Last week, NBNK, which is headed up by former Northern Rock chief executive Gary Hoffman, made a renewed offer for the Verde branches which would see the new bank floated on the stock market.
The Co-op deal has been held up by talks with regulators over the Co-op's ability to run the enlarged banking business.
Co-op currently has around two per cent of the UK current account market with 345 branches managing £45 billion in assets, and a successful bid for the Lloyds branches would give it a six per cent market share.
This is the minimum share required to create an effective competitor for the UK market, according to the Independent Commission on Banking.
However the Co-op is believed to have tailored its bid to reduce the number of mortgage accounts being sold within the divestment package.
This would reduce a funding gap on its deposits and around £30 billion in loans being sold by Lloyds.
Co-op has insisted on a funding gap of no more than £5 billion between assets and deposits.
Most of the assets Co-op has asked to be removed from the sale are linked to mortgages.
NBNK's earlier rival bid would have left it with a £10 billion funding gap based on its taking assets valued at £45 billion on £35 billion of deposits.
In its revised bid tabled last week, NBNK said it would take the cost away from Lloyds in floating the branch network itself – an option Lloyds is still considering – as well as giving Lloyds the option of taking cash or shares in the new company.