Co-op’s bid to buy Lloyds bank branches ‘progressing well’

Peter Marks said the talks were “a complex process” and no date had been set by Lloyds for when a decision would be made.

Lloyds has promised an update on the sale by the end of June, with the Co-op its preferred option despite regulatory hurdles delaying the sale process.

The European Union is forcing Lloyds to sell the 632 branches in return for state aid received during the 2008 crisis which left the taxpayer with a 40 per cent stake.

The bank group has until November 2013 to dispose of the Verde estate, which accounts for a 4.6 per cent share of the UK current account market and up to 19 per cent of Lloyds’ mortgage book, with around five million customers.

The Co-op, which is Britain’s biggest mutually-owned business, will triple the size of its banking business if the deal goes ahead.

Lloyds, which is due to hold a board meeting tomorrow, could also attempt a stock market listing or consider a deal with NBNK, the bank buyout vehicle which is waiting in the wings.

Some of the regulatory uncertainty surrounding the Co-op offer has been addressed through plans for Verde’s management team to transfer with the business in order to run the Co-op’s enlarged banking arm.

Lloyds will also provide the systems and technology platforms needed to run a large banking operation. The Project Verde business was expected to fetch between £1.5bn and £2bn last year but there has been speculation that the bank may be willing to lower the price by as much as 50 per cent. Lloyds and the Co-op had been in exclusive talks and were supposed to reach an initial agreement by the end of March.

But this was delayed amid questions over whether the Co-op has an experienced team and the right structure to run the enlarged business. At the time, Co-op chief executive Mr Marks hit back at critics, saying: “We know how to run a bank.”