Lloyds considers cut-price sale of 632 branches

The Project Verde business was expected to fetch between £1.5bn and £2bn last year but with bank shares under pressure market sources say it may have to lower the price by up to 50 per cent.

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

The part-nationalised 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.

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 on Wednesday, could also attempt a stock market listing or consider a deal with NBNK, the bank buy-out 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.

Lloyds will also provide the systems and technology platforms needed to run a large bank.

However, there is still concern that because the financial services arm will dwarf the rest of the Co-op business the whole of the Co-op will have to be regulated as a financial institution.