The Co-operative Group is set to become a major challenger in banking following the acquisition of 632 branches from the Lloyds Banking Group.
The Group announced that it has agreed to proceed with the purchase of the branches, along with an estimated 4.8 million customers, which will take its market share from 1% to 7% with a total of 11m customers.
Subject to approval by the FSA, the transaction is expected to be complete by November 2013; and will bring almost 1,000 branches under The Co-operative Bank brand taking up 10% of the British banking network.
This deal includes 164 Cheltenham & Gloucester branches, along with 284 Lloyds TSB branches in England and Wales and 184 across Scotland, which are a part of Verde created out of the Lloyds Banking Group due to EU competition regulations.
When a bidding war broke out with NBNK last year, the estimated price tag was £1.5 billion. But that price is now considerably less with the Group paying £350m upfront, along with an additional £400m based on performance targets before 2027.
Group Chief Executive Peter Marks said this deal would deliver the “biggest shake-up” in high street banking in a generation. He added: “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.
“It would be a great deal for the taxpayer because as well as receiving a fair price up front, the deal would also mean they would share in the profits of the enlarged bank for years to come.
“So far as UK banking generally is concerned, this would be a great deal because it would help restore trust in a sector whose image has been badly tarnished over recent years.”
Peter Hunt Chief Executive of the mutuals advocacy organisation, Mutuo, said: “Today’s announcement is excellent news for the Co-operative Group, its customers and the entire mutual sector. This move will greatly increase choice on the high street for consumers that are looking to do business with a customer focused and owned bank. It will also increase corporate diversity in the financial services sector and help to challenge the banking monoculture that led to the financial crisis. Peter Marks has transformed the Co-operative Group family of businesses into major players on the UK high street.”
Chancellor George Osborne also welcome the purchase by the Group, he said: “This is another step towards creating a new banking system for Britain that gives real choice to customers and supports the economy.
“The sale of hundreds of Lloyds branches to the Co-operative creates a new challenger bank and promotes mutual.”
The new Chief Executive of the combined banking business will be Paul Pester, who is currently Chief Executive of Verde.