by Mark Johnston
It seems that the Co-operative bank is to purchase 632 Lloyds branches, with a bid thought to be worth around £1 million.
Lloyds TSB, the state rescued bank which is 41% owned by the government, is being forced to sell some of its branches under European Union competition rules. These rules ensure that competition with in the EU is not restricted or distorted.
The Co-op has beaten off competition from NBNK investments, as they offered a smoother transaction. A spokesman for NBNK stated that “the company regrets that it was not given the opportunity to create a break with the past, delivering to the high street a well capitalised, new challenger bank and brand devoted to providing the level of service that UK banking customers deserve”.
The deal includes 5.5 million customers and £83 billion in deposits and mortgages, on the stock market.
Therefore the takeover will take the Co-operative’s UK market shares from 2.3% to 6%, which in turn poses a much bigger challenge to the ‘big five’ banks which include Lloyds, RBS, Santander, HSBC and Barclays.
This deal will compliment the Co-op’s previous takeover of the Britannia branches and also their successful £200 account switching offer that lured in many more new customers.
The purchase of the 632 branches will triple the size of the Co-operative banks branches to 947 across the UK.
The Co-operative will in turn boast more than 6% of all UK current accounts, creating a major new ‘force’ on the high street, comparable in size to the Nationwide building society. It will also see the bank gain a much larger national presence.
Many experts believe this takeover will change the face of the high street.
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 that we have been working to build upon our strong foundations in banking to ensure customers have a real alternative on the high street”.
The bank has continued to go from strength to strength following the merger with Britannia.
News that the Co-op is to purchase branches of Lloyds has been greeted warmly by consumer groups.
Peter Vicary-Smith, chief executive of Which? Magazine, said of the takeover “if people are to get a better deal from their banks they need greater competition. People tell us they like the Co-operative bank and we think they can teach the other banks a lesson in good customer service”.
Director of financial services at consumer focus, Sarah Brooks, added “for big to be beautiful for customers, the Co-operative must provide good value products and great customer service”.
Competition between banks is flimsy at best especially on service, the industry regularly get a battering in the press for their treatment of their customers. A larger Co-op might just provide enough allure to see those dissatisfied by their current bank start to switch.
However the Co-op will need to look at their mortgage deals as at present their current standard variable rate (SVR) is one of the highest on the market at 4.24% compared to 3.99% from Lloyds, 3.94% from HSBC and 3.89% from Barclays.
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