The Co-operative Group proceeds with Lloyds deal

The Co-operative Group hails great deal that would mark the biggest shake-up in high street banking in a generation.

The Board of The Co-operative Group has agreed to proceed on the basis of non-binding heads of terms with Lloyds Banking Group (LBG) in relation to the acquisition of the “Verde” business. The move by The Co-operative Group would create a real challenger bank on the High Street with almost 1,000 branches.

The Co-operative Group and LBG are now working towards agreeing definitive, binding documentation, subject to the satisfactory completion of further due diligence and Board approvals.  Completion of the transaction is expected before the end of November 2013 and will be conditional on, among other things, regulatory approvals from the FSA, HM Treasury and the European Commission.

Highlights

• The Co-operative Group to acquire 632 branches from LBG with an estimated 4.8m customers, thus creating an enlarged Co-operative Banking Group, differentiated through the quality of its customer-centric, member-led, ethically driven, banking model
• The acquisition meets the recommendation from the Independent Commission on Banking to create a challenger bank with a market share approaching 7% of today’s UK personal current accounts
• The transaction would accelerate delivery of The Co-operative Group’s strategy, creating the compelling co-operative alternative with a combined bank network of almost 1,000 branches across the UK, representing nearly 10% of  today’s UK bank network and 11m customers
• The acquisition would increase the scope and reach of The Co-operative Group as a whole and enable The Co-operative Banking Group, through an extensive branch network, to provide banking services to The Co-operative Group’s wider member and customer base
• Paul Pester, currently Chief Executive of Verde, would become Chief Executive of the combined banking business, subject to FSA approval.

Peter Marks, Group Chief Executive of The Co-operative Group, said:

“We’re delighted to be announcing that we have reached agreement in principle with Lloyds Banking Group on the terms of this important and transformational transaction.  This deal would deliver the biggest shake-up in high street banking in a generation.  Consequently, we believe this would be a great deal for customers, for the public, for UK banking generally and for The Co-operative Group, in particular.

“It would be a great deal for customers because it would make the services of our member-owned, customer-led, ethically-driven, bank available to millions of people we’ve not been able to serve up until now. 

“The acquisition of the Verde business would significantly advance our growth strategy, creating a combined bank approaching 7% market share of UK personal current account customers. That would allow us to really challenge the status quo on the high street.

“Despite the crisis in the financial sector, our bank has continued to go from strength to strength, coming through the financial crisis in great shape and maintaining our ethical and socially responsible credentials.”

Ed Mayo, Secretary General of Co-operatives UK, welcomed the agreement:

"This is a landmark deal for the Co-operative Bank and will help restore more of a mix of options for consumers in the banking market. This agreement can move the UK closer over time to the European average of a twenty per cent minimum market share across different co-operative and mutual banks."