Lloyds Given Clear Choice

by Mark Johnston

The recent Independent Commission on Banking (ICB) may force the Lloyds Banking Group to sell quite a lot more of their business than the group had planned for and had anticipated per regulation.  This may happen in order to ensure the competitive nature of the British banking market. 

Lloyds Banking Group Plc, the biggest mortgage lender in Britain, is poised to change the face of the banking network forever in the next few days.  Lloyds have solicited the help of the investment giants Citygroup Incorporated and JP Morgan Chase & Co. to help find buyers for about 600 branches that Lloyds have to sell. 

Lloyds were bailed out in 2008 with an injection of tax payers money to the tune of £37 billion which was quoted as being an “absolute humiliation” by a BBC boss at the time.  They are now 41 per cent owned by the current UK coalition Government. 

The highest bids are likely to come from the National Australian Bank and Sir Richard Branson’s Virgin Money.  The sale of these branches is required by the European Union regulators.

Private discussions have revealed that the sale is due to generate somewhere in the region of between £2 billion and £3 billion on the market and accounts for about 5 per cent of the U.K’s checking account market.  The sale must go ahead, according to the stipulation of their bailout, by the end of 2013 in order to comply with the terms and conditions.

The new chief executive, who took office on the first of March has been quoted as saying “We made the decision to accelerate the start of the sale process in order that we met the timescales agreed with the government and EU,” Horta-Osorio said in the statement. “By doing this we also bring greater certainty and clarity for our colleagues and our customers.”  This decision was made within 10 days of taking up his new post. 

This is the latest in a string of sell offs from the Lloyds group.  The Bank of Scotland Integrated Finance investment arm was one of the last items to be sold and they have also made more than 26,000 redundancies since the UK Government bailed them out in October 2008.  This appears to all be in line with the groups target to reduce its balance sheet by £200 billion by 2014. 

Luckily, the ICB added a section in their report that said it would be unwise to undo the merger of the Lloyds banking group and Halifax Bank of Scotland from 2008. 

“There is cause for regret that the government in 2008 amended competition law to facilitate the Lloyds TSB/HBOS merger but the facts in 2011 have to be taken as they are. In the light of those facts, reversing the merger does not appear to be a sensible course to pursue,” the commission said.

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