Osborne says Lloyds could avoid selling more branches

LLOYDS’ current plans for the sale of over 600 branches will boost industry competition, chancellor George Osborne told a committee of MPs yesterday, appearing to diverge from views expressed by the Independent Commission on Banking (ICB).

The chancellor ruled out reversing the Lloyds-HBOS merger and indicated that Lloyds could satisfy the ICB by improving the balance sheet of the branches on sale rather than by increasing the number of branches on the block. “I’m confident that the divesting of the Lloyds branches which is underway… will help create a strong challenger,” he said.

The Commission’s interim report said, by contrast: “The Lloyds Banking Group divestiture would be unlikely to give rise to a strong challenger, at least in its early years.”

Osborne also claimed that the ICB “said either in terms of branches or strength of the balance sheet or both we should go beyond” the current sale.

However, the Commission indicated clearly that the it is concerned with the scale of the branch sales, not just their balance sheet strength, calling the current divestiture “insufficient”.

Osborne’s position confirms the news first reported by City A.M. last month that the Treasury is unlikely to intervene in the Lloyds branch sale despite the ICB’s request that it should.