Taxpayers lose out in Lloyds branch sell-off: Co-op buys up 600 for £1bn less than bank was offered last year

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Taxpayers lose out in Lloyds branch sell-off: Co-op buys up 600 for £1bn less than bank was offered last year

July 20th, 2012

FAKE NEWS for the Zionist agenda

Lloyds had offer from rival for £1.7billion last year
City veteran brands Co-op deal ‘daylight robbery’

By
Becky Barrow

PUBLISHED:

19:04 EST, 19 July 2012

|

UPDATED:

19:08 EST, 19 July 2012

Lloyds agreed to sell hundreds of branches to the Co-op for a rock-bottom price yesterday, prompting fears that taxpayers will end up short-changed from their bail-out of the bank.

Banking sources questioned why Lloyds accepted the bid, which could be for as little as £350million, when it had a rival offer for around £1.7billion last year, with one City veteran calling it ‘daylight robbery’.

Lloyds is also giving the Co-op £1.5billion in capital as part of the extraordinary deal, meaning that it could end up taking a loss of more than £1billion from it.

Bargain: The Co-op has bought 632 Lloyds branches for £1bn less than was offered last year

The 632 branches gained by the Co-op come with 4.8million Lloyds customers, 8,000 of its staff, £24billion of mortgages and 3.1million current accounts.

Lloyds was forced into offloading the branches by European state aid rules, after it accepted a £20billion bail-out from the taxpayer at the height of the global financial crisis that left it 40 per cent state-owned.

In light of the state support, its share of almost a third of the UK mortgage and current account markets was seen as unfair, and Lloyds was told to reduce it.

Yet the sale for such a low price raises questions about taxpayers’ chances of getting back their investment.

The only other sale so far of a bailed-out bank – the recent sale of the ‘good’ part of Northern Rock to Virgin Money – lost the taxpayer ‘between £175million to £289million’, according to spending watchdog the National Audit Office.

Trustworthy? The Co-operative Bank has taken over hundreds of Lloyds branches

David Buik, a City veteran and strategist at the spreading betting firm Cantor Index, said of the Lloyds deal: ‘This is an absolute knock-down price.

‘In fact, it’s robbing the shareholders and the taxpayer blind. Frankly, this is daylight robbery. Dick Turpin would have been proud.’

Co-op could pay an additional £400million on top of the initial £350million, but only if financial performance targets are met. Even if they are, the full amount will not be paid until 2027.

But that does not take into account the £1.5billion of capital Lloyds included with the sale, which leaves it with a net loss of up to £1.15billion.

Rival bidders, such as NBNK, led by the former Northern Rock boss Gary Hoffman, are understood previously to have offered £1.7billion but it is thought the Co-op was seen as a more stable, experienced purchaser.

‘It’s robbing the shareholders and the taxpayer blind. Dick Turpin would have been proud’

City veteran David Buik

The Coalition has also promised to ‘promote mutuals’ such as the Co-op, which could explain why its offer was chosen.

Yesterday Peter Marks, group chief executive of The Co-op, based in Manchester, said: ‘Yes it’s a good deal. That’s what I’m paid to do.’

The purchase is not expected to lead to major job losses at the Lloyds branches.

But for customers, many questions remain unanswered about the long-term impact on their current accounts, savings and loans.

The sale, which still needs to be approved by the City regulator, the Treasury and the European Commission, should be completed ‘before the end of November 2013’.

Lloyds – under chief executive Antonio Horta-Osorio – will be left with 2,243 branches, while the Co-op will have 1,000 branches, 11.3million customers and around 7 per cent of the current account market.

Sarah Brooks, of Consumer Focus said: ‘The Co-op must use its new challenger status to provide a real alternative to other banks with a focus on straightforward products and excellent customer service. Co-op must offer a point of difference and not just more of the same offered by the big five banks.’

Matthew Sinclair, director of the TaxPayers’ Alliance, said: ‘Politicians promised that taxpayers would do well out of bailing out the banks, but this is yet more evidence that they haven’t.’

QA: THE INS AND OUTS OF THE LLOYDS BUY-UP

Why did Lloyds sell?
Under European state aid rules, Lloyds was forced to sell off some of its branches, customers and their accounts in return for being rescued by the taxpayer.

What are they selling?
Lloyds is selling 632 branches – all its Cheltenham Gloucester branches, all Lloyds TSB Scotland branches and some of its Lloyds TSB branches in England and Wales. For a full list, go to www.lloydstsb.com/branch_transfer.asp and click on the link at the bottom of the page.

Is it just the branches?
No. The Co-op is also getting 4.8million Lloyds and Cheltenham Gloucester customers that come with those branches, including 3.1million current account customers and 100,000 business customers.

When will this happen?
The deal should be completed before the end of November 2013. By then, all the sold branches will be rebranded as TSBs.

How do I know if I am affected?
You will be affected if you bank with one of the branches included in the sale. Lloyds said it will write to all customers who are affected by the transfer early next year to explain exactly what the changes mean.

What if I don’t want to become a Co-op customer?
You can switch to a rival bank or building society, or simply switch your account to a Lloyds branch which is not being sold.

Will the terms that I have with Lloyds change immediately?
No. Everything from mortgages to current accounts will stay on the same rates – for the moment. A Lloyds spokesman said: ‘You can carry on banking just as you do today.’

What about the future?
Yesterday the Co-op insisted it will offer ‘a great deal for customers’. In reality, no one yet knows whether Lloyds customers could end up with a better deal or a worse deal.

How does the Co-op compare at the moment?
Many Lloyds customers enjoy a fabulous deal that they will not want to see changed. For example, around 520,000 homeowners have one of the best mortgage deals in Britain. Under this standard variable rate (SVR) deal, which new customers have been banned from getting since June 1, 2010, the rate can never be more than two percentage points higher than the Bank of England’s base rate, which means it is currently 2.5 per cent. By comparison, the Co-op’s SVR is almost double that, at 4.74 per cent.

By
Alex Brummer

Shrinking empire: Lloyds chief executive Antonio Horta-Osario and wife Ana

After the series of scandals that
have besmirched British banking recently, from rigging Libor at Barclays
to the IT meltdown at Royal Bank of Scotland and money-laundering at
HSBC, it would appear just the right moment to welcome a new, sizeable
lender on Britain’s high street.

But
the idea of trusting the Co-op Group, not known for its
state-of-the-art customer services, with a 10 per cent share of
Britain’s banking markets is not a great confidence-booster.

Lloyds Banking Group, which is selling 632 branches to the Co-op for a knockdown price of £700m, had little choice.

The sale was forced upon the bank by
the European Union after state aid was pumped into the bank in 2008
following the disastrous Lloyds TSB takeover of Halifax owners HBOS.
That deal gifted Lloyds a dominant near 30 per cent share of Britain’s
current account and mortgage markets.

The
track record of the new owner, which will now have more than 1,000
branches nationwide, does not on the whole fill one with confidence.
Apart from anything else it had difficulties integrating its IT systems
with those of the much smaller Britannia building society that it took
over in the aftermath of the financial crisis in August 2009.

This
time, the Co-op is seeking to avoid the same problems by piggy-backing
on the established Lloyds bank IT system and will be assisted by Lloyds
executive Paul Pester, who was recruited last year to run the branches
earmarked for sale.

The
extent of Lloyds’ continuing involvement should provide some comfort to
customers who suddenly find their branches and accounts switched to the
Co-op – without being asked first.

The
knockdown price of £700million, half of which will not be received by
Lloyds for several years, reflects the lack of appetite for any bank
assets at present.

It
also illustrates the desperation of Lloyds to get the surplus branches
off its books and to escape from the grip of the Government, which
holds a 44 per cent stake.

Chancellor George Osborne expressed
warm support for the deal on the grounds that it is ‘another step
towards creating a new banking system for Britain’. Precisely what kind
of banking system is a moot point.

Despite
its efforts to cultivate a reputation as an ‘ethical’ bank the Co-op
has not been without its detractors. During the financial crisis it,
like many banks, was forced to make write-offs on previously undisclosed
holdings of toxic securities built around American sub-prime mortgages.
Moreover, as banker to the Labour Party – with which the co-operative
movement is affiliated – it allowed its political allies to run up a big
overdraft.

The biggest
drawback is the Co-op’s opaque ownership and governance structure.
Described as a mutual, its real ownership is exercised through a series
of unaccountable committees deeply involved in politics and running a
series of other businesses ranging from grocery stores to funeral
parlours.

The idea of
such a nebulous enterprise owning a leading and complex financial
institution will not provide great assurance to 4.8million new
customers.

Here’s what other readers have said. Why not add your thoughts,
or debate this issue live on our message boards.

The comments below have not been moderated.

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Despite this sale of assets, surely the Lloyds Group is still responsible for the repayment of the original bail-outs they received? This just makes it more difficult for them? Obviously it doesn’t look good and where is the voice of reason from the government?

– Graeme, Warrington, 20/7/2012 10:47

Bearing in mind most Lloyds/TSB branches are only a few doors away from a Halifax branch in England wales, a fewdoors way from a Bank of Scotland branch in Scotland.The alternative would have massive branch closures as the fat cats won’t tolerate duplication.So the taxpayer would hve had housands more unemployed bank workers their fmilies to pay dole money to.
At least this is the lesser of two evils, by saving jobs(therefore dole money) providing the competition of a different bank on the high street.
Incidentally I lost out with Northern Rock Halifax shares.

– wbrown, glasgow, 20/7/2012 10:35

@The malign influence of the EU dictatorship – AGAIN!
– William, UK, 20/7/2012 9:34==============================what’s next? blame the illuminati?

– modified.karl, : – _ – :, 20/7/2012 10:33

Reliable, ethical bank. Co-op didn’t need a bail out when all the others needed one and is not involved in the libor scandal either. Good decision! – modified.karl, . . . . . . . . . Lloyds TSB was a Triple A rated bank with mimimum exposure to sub-prime. The Gov struggled to deal with RBS and Northern Rock. Lloyds wanted nothing to do with HBOS (Halifax Bank of Scotland) run by an ex-grocer and riddled with bad debts, but were pressured by the Gov and Treasury to ‘rescue’ HBOS, requiring a lesser taxpayer subsidy.
Now Lloyds has to all but give away the branches it saved to the Co-Op, who having no experience on this scale, need Lloyds staff and computers to do the job. So it’s all a waste of time really. It will cost savers, shareholders and UK taxpayers money just to satisfy EU diktats. Of course the Treasury officials knew this at the time of the merger. I’m not a fan of Lloyds, but they do deserve a ‘Thank you’!

– Peter, London, UK, 20/7/2012 10:27

DM please, please, please do us a public service. Find out who the man or woman is (no doubt a unelected civil servant)who ultimately signs off on this taxpayer funded give away and print who it is so we can thank them!!!!!
– philipspain, chester, 20/7/2012 10:20——Er, that would be George Osborne who was all over the TV news last night claiming the credit! He is elected though. Well, sort of.

– The truth is out there…., Somewhere, 20/7/2012 10:24

£350m? Bargain. You couldn’t even buy a decent football team for that nowadays.

– David Bourke, Rochester, Kent., 20/7/2012 10:20

DM please, please, please do us a public service. Find out who the man or woman is (no doubt a unelected civil servant)who ultimately signs off on this taxpayer funded give away and print who it is so we can thank them!!!!!

– philipspain, chester, 20/7/2012 10:20

The co op are a good bank, always english customer support which reduces the time you need to spend on the phone to them and they always deal with issues promptly. They picked up a good deal for themselves like any business would do.

– onlyme, lancs, 20/7/2012 10:16

The Co-op is the last place I would want to bank with. The so-called ethical bank wastes millions on pet liberal projects, I wouldn’t trust the bank if my life depended on it. THE QUESTION HAS TO BE ASK IS WHY SELL OF THE BANK. KEEP IT IN THE PUBLIC SECTOR UNTIL WE HAVE BENEFITED FROM IT AND MAKE OUR MONEY BACK WITH INTEREST. What needs to be done is to restart the POst Office bank in its many guises. That way we would be able to regulate the other banks. THIS MOVE IS JUST SELLING OFF OUR ASSETS TO THE CARPET BAGGERS, leaving the taxpayer to pick up the huge losses.

– John, Wales, 20/7/2012 10:11

I am with Lloyds tsb, And then i might be with the Co-op…i am confused, what is the best for my choosing.???

– maggi, uk, 20/7/2012 10:07

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