LLOYDS has received just one formal bid on the 632 branches it is selling.
NBNK Investments, the buy-out vehicle set up by Lord Levene, bid substantially below the £2bn that Lloyds is hoping to get.
As part of the conditions of the bid, City A.M. understands that NBNK would agree to buy only a portion of the assets on sale, largely mortgages, narrowing a £30bn funding gap in the original package to around £10bn. It would purchase the entire £36bn deposit base.
Lloyds has decided to extend its soft deadline for bids as the other potential buyers, Hugh Osmond’s Sun Capital and Co-operative Financial Services, have requested more time to do due diligence on the assets.
At the core of their concerns is how the worsening economic situation will affect the funding gap in the branches. Lloyds had argued that it would narrow organically as consumers paid back their mortgages, but buyers are not convinced.
A source familiar with the deal said that Sun Capital and Co-op are not comfortable bidding yet with the degree of uncertainty. As City A.M. revealed early this month, Lloyds has had trouble allaying bidders’ fears over the funding issue, eroding the price it is likely to get.
If Lloyds decides it cannot get enough for the branches, it could try to float them, but with London boasting a dismal record for floats recently, that could prove risky.
The deal must complete in 2013 under an arrangement reached with the European Commission.