LLOYDS is in talks with six interested parties over the sale of its 632 branches, City A.M. understands, despite only two of them having submitted formal bids so far.
However, some of those involved are only interested in chunks of the £68bn in assets on sale, which could prove a headache for regulators who want to see the bank sell off more, not less.
The six parties include NBNK Investments and the Co-operative Group, both of which have tabled indicative offers, as well as Virgin Money, National Australia Bank and Resolution founder Clive Cowdery. It is thought that Nationwide Building Society could be the sixth.
But it is still not clear if Lloyds will be able to sell off the whole package at once: both NBNK and the Co-op could alter their offers once they gain access to the branches’ books.
Virgin Money was thought to have tabled a bid by last Monday’s informal deadline, but in fact did not attach a number to its expression of interest. As City A.M. revealed last week, Virgin is leaning towards a bid for Northern Rock instead in part due the Rock’s funding surplus.
It is understood that in contrast to the Lloyds package, the Rock branches on offer have a 72 per cent loan-to-deposit ratio – £17bn of deposits on a £12bn mortgage book.
That translates to a £5bn funding surplus for the Northern Rock branches on sale, versus a £25bn gap in the Lloyds branches.
Lloyds claims this gap will more than halve organically during the time it takes to complete the sale, and has arranged a conditional loan from its advisers, Citi and JP Morgan, to potential cover the shortfall. Alternatively, a cash-rich buyer could bid for both in the hope of part-plugging the Lloyds hole with Rock deposits.
LLOYDS SALE: WHO ARE THE SERIOUS CONTENDERS?
THE Co-operative Group, one of two potential buyers to have submitted a bid, would see its branch numbers shoot from some 340 to over 1,000 if it won the auction. It would be the group’s biggest ever purchase, even larger than its £1.5bn acquisition of Somerfield last year, and would most likely be financed by debt.
BUYING Lloyds’ 632 branches would catapult Virgin into the big banking league, a far cry from its £12m purchase of Church House Trust last year. But the firm is playing hard to get, at first signalling its interest and then refusing to table a formal offer. Virgin is understood to be dubious about the quality and complexity of the assets on sale.
THE investment firm headed up by Lloyd’s of London’s Lord Levene raised £50m floating on AIM last year and is keen to get its hands on some serious UK banking assets to enter the retail and wealth management market. It will need more cash to back up its offer for the Lloyds branches, however, even though its bid is one of only two so far.
NATIONAL AUSTRALIA BANK (NAB)
NAB, which operates in the UK as Yorkshire Bank and Clydesdale Bank, was talked up as the front-runner before failing to table a bid last week. It is still in the loop though and, like Virgin, could just be playing hard to get. But NAB has also never fully quashed talk that it could be keen to quit the UK altogether if it finds a suitable exit.