The Co-operative Bank has emerged as the frontrunner to buy a huge tranche of Lloyds TSB branches after Lloyds today announced the Co-op is its preferred bidder.
Lloyds will sell 632 of its branches - including all Cheltenham & Gloucester branches, its Scottish Lloyds TSB branches as well as a selection of English and Welsh branches - to comply with European Commission competition rules.
Discussions between the two banks will continue and, pending regulatory approval, terms will be finalised by the end of March 2012.
Tim Tookey, interim group chief executive and group finance director of Lloyds, says the bank is "pleased" with developments. He expects the final transaction of the branches to be completed by the end of November 2013.
Alternative on the high street
Peter Marks, group chief executive of the Co-operative group, says the move will position the bank as "a real alternative on the high street". He adds: "We think a combination of these branches and our own would significantly strengthen our position as a real challenger in relationship banking in the UK."
Industry insiders claim the expansion of a mutual such as the Co-op is good news for banking customers.
"All of our research shows that mutuals offer a better customer service; this change will markedly increase the number of branches in the high street that are more interested in customer service than shareholder return," says Adrian Coles, director general of the Building Society Association.
Sarah Brooks, director of financial services at Consumer Focus, says the sale is the move could help create "a thriving retail banking sector".
"But for big to be beautiful for customers, the Co-op must provide good value products and great customer service. This is an opportunity to inject some much needed innovation and competition into our retail banking sector," Brooks adds.