Six possible bidders in talks with Lloyds
“There are six parties to whom we’re talking,” said one insider.
Yorkshire Bank’s parent company National Australia Bank, Virgin Money and Resolution, the takeover specialist founded by insurance entrepreneur Clive Cowdery, have been in talks with Lloyds but have not committed to a formal bid.
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Hide AdIt is also understood that an American private equity company has made a firm bid for the portfolio.
European regulators ordered Lloyds to sell the branches as payback for being rescued by the Government during the credit crisis.
The bailout led to the taxpayer owning a 41 per cent stake in Lloyds.
Selling the branches, which analysts said could fetch £3bn, would mark an important first step towards an eventual sale of the state holding.
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Hide AdThe Lloyds branch sale is taking place alongside a plan to sell off Northern Rock, the bank which nearly collapsed during the credit crisis and had to be fully nationalised.
Yorkshire Bank’s parent company NAB has been in on-off discussions with Lloyds for several months.
NAB is yet to make a bid and any offer will depend on whether the acquisition improves shareholder value.
Virgin has said it is looking at both the Lloyds branches and Northern Rock, but a source said it believed Northern Rock offered the best proposition.
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Hide Ad“Northern Rock is a complete asset that is ready for sale, whereas Lloyds is more complex,” added the source.
Another insider said it was “not a bad assumption” that Resolution would also have a look at Northern Rock.
A major obstacle to the Lloyds branch sale is the need to plug a funding gap for the assets on sale.
The portfolio includes assets of £64bn and liabilities of 32bn, Lloyds said last month.
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Hide AdThe costs of transferring the branches are likely to be far higher for Lloyds if it sells the branches to a start-up bank, which potentially gives an edge to established rivals who have infrastructure in place.
Virgin and NBNK would have to raise funds from their own investors to proceed with the Lloyds deal, and analysts have said NAB UK could play a role by teaming up with one of those two to provide financing or infrastructure support.
“NAB’s involvement in a successful Virgin or NBNK deal will be important in crossing major regulation, infrastructural or funding hurdles,” said Oriel Securities analyst Vivek Raja.
Lloyds has said a fallback option would be to spin off or float the branches if it fails to pull off a sale.
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Hide AdLast night Lloyds’ shares closed down 4.3 per cent, a fall of 2p to 45.1p.
Current stock market uncertainty makes a sale its preferred option.
Broker Seymour Pierce said the difficulties over the sale of branches highlighted the tough times being endured by UK banks, with part-nationalised lender Royal Bank of Scotland also looking to sell an aviation business to raise capital.
“The issue of funding may be part of a larger problem – the unattractiveness of the UK banking market, with debt/disposable income over 150 per cent and negative real interest rates reducing disposable income by the most since the 1970s,” Seymour Pierce said in a research note.
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Hide AdThe Government’s investments in RBS and Lloyds are currently loss-making.
The 632 outlets that Lloyds is being forced to sell consist largely of the TSB and Cheltenham and Gloucester brands.
New chief executive Antonio Horta-Osorio last month pledged to speed up the sale in a move to make his mark on the bank as part of a strategic review that included 15,000 job cuts by 2014 and plans to revitalise the Halifax brand.
Lloyds is said still to prefer a disposal, especially as a demerger could be complicated as the Government would end up with a 41 per cent stake in any spin-off to match its current stake in the bank.
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EUROPEAN UNION FORCING SALE
Lloyds is being forced to divest the 632 branches by the European Union in return for the £20bn in state aid it received following the 2008 credit crisis.
The bank has a deadline of November 2013 to finalise a deal.
Lloyds TSB Group was renamed Lloyds Banking Group in January 2009, following the acquisition of HBOS.
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Hide AdThis deal turned Lloyds into the largest retail bank in the UK with one in three people in the UK banking with the group.
Lloyds Banking Group has 104,000 full-time staff worldwide.
In the UK, Lloyds has main offices in London, Halifax, Cardiff, Edinburgh and Belfast among others.