THE GOVERNMENT did favour the Co-operative Bank as a partner for the 632 branches being sold by Lloyds as it wanted a big mutual challenger in the market, insiders on the deal have told City A.M.
However sources insist that did not put Lord Levene’s NBNK’s bid for the units at a disadvantage as the alternative buyer did not have sufficient funds in any case.
Lloyds must sell the branches under the terms of its bailout, a requirement designed to increase competition in the sector.
But the sale to the Co-op Bank collapsed, leaving Lloyds seeking to float the branches as a new bank.
Levene has written to HM Treasury (HMT) and UK Financial Investments (UKFI), the unit that represents the state’s stake in bailed out banks, to complain his bid was not taken more seriously.
And NBNK board member Lord Forsyth has said the government misjudged the situation.
“It is inexplicable to me how this bid could be approved either by Lloyds or UKFI who are responsible for protecting taxpayer’s interests,” Lord Forsyth told the Telegraph.
UKFI, HMT and Lloyds declined to comment. The Co-op insists it was a commercial deal. However sources have told City A.M. there was indeed a preference for the Co-op Bank’s bid.
“The process was led by the Treasury and Lloyds’ management, and HMT was keen to promote a mutual,” said the insider.
“But the stumbling block Levene doesn’t recognise is that he didn’t have enough money, which clearly weakened his position.”
As a result the source insists the Co-op deal did seem the best for the taxpayer, and was made on a commercial basis.