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8th November 2011

Co-op to bid for Lloyds Banking branches

Co-operative Financial Services confirmed that it is to bid for the 632 Lloyds Banking group branches for sale, under Project Verde. Whilst one of three showing an interest in the first round only NBNK has submitted a formal bid to date. It is notable in the quotation below that a non-binding bid is mentioned as opposed to a conditional bid which may have been expected given this is the second round of the proceedings.


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 this we remain interested in the Lloyds Banking Group's branch assets as we believe this would support our moves to grow our relationship banking business in the UK. 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."


The idea that a co-operative enterprise with a strong ethical investment policy and green credentials may gain the Lloyds Banking branches will probably garner public support. The Co-operative Bank also has some payment and banking infrastructure in place, though whether large enough to deal with the proposed acquisition may be questionable. A concern must be the very low profitability. Whilst the huge profits of some banks in the past were a cause of concern too low profits should be also. Co-op Bank has faced special charges it is true - first from the Britannia merger and then Payment Protection Insurance charge. However if a bank cannot generate profit then it cannot adequately protect itself against the unforeseen or easily expand its lending. The bank made £2.6m profit in the first half of this year and £28.2m in the first half of 2010.