Co-op nears cut-price Verde deal

A newspaper report said the mutual’s board is due to meet early next week to approve the purchase of the branches known as Project Verde, with more details of the agreement likely soon after.

It is understood to be at a steep discount to the previously mooted £1.5bn price tag, although Lloyds is reportedly in line for additional payments over a period of years if the business performed well.

This could mean the bank, which is 40 per cent owned by the Government, could receive close to £1bn for the network of branches it was ordered to sell to comply with EU state aid rules.

As well as the sharp deterioration in the economy, the sale price has been affected by a reduction in mortgage loans in order to ensure assets and liabilities are more evenly matched.

The Lloyds purchase will triple the size of the Co-op’s banking arm and increase its share of UK branches to around 10 per cent. The business accounts for a 4.6 per cent share of the current account market.

Lloyds chose the Co-op as its preferred bidder in December, but sale plans have suffered lengthy delays and initial hopes to sign a deal by the end of March were dashed due to protracted talks with regulators.

It is thought that some of the regulatory uncertainty surrounding the Co-op offer has been addressed through plans for a Lloyds management team to transfer with the business in order to run the Co-op’s enlarged banking arm.

Lloyds is also said to be providing the systems and technology platforms needed to run a large banking operation.

However, it is possible that because the financial services arm will dwarf the rest of the Co-op business the whole of the Co-op will have to be regulated as a financial institution.