Vickers in Lloyds branch sale rethink

THE Independent Commission on Banking (ICB) is preparing to drop one of its main demands regarding Lloyds’ sale of 632 branches, City A.M. has learned.

The commission, headed by Sir John Vickers, is close to accepting that the bank should shrink the package of assets on sale despite having previously said that doing so would make it “below the scale required to mount an effective competitive challenge to incumbents”.

It is understood that after talking to bidders on the package – NBNK Investments and the Co-operative Group – the ICB is willing to sacrifice its demand that Lloyds sell more than the £68bn in assets and 632 branches currently on the block.

It could instead focus only on its desire that Lloyds sell more branches or a greater share of the personal current account (PCA) market, allowing the bank to shrink the mortgage book on sale, which it sees as less important.

The rethink comes after City A.M. revealed in June that the Treasury was not keen on intervening to overhaul the sale despite Vickers requesting it to do so. Instead, Vickers is moving towards the Treasury’s point of view.

In April, the ICB said that the sale needed to be “substantially enhanced” in order to ensure that a buyer would have enough market share to shake up competition in retail banking.

It warned that “there is a serious prospect that the structure of the divestiture will be different from the 4.6 per cent of PCAs and 19.2 per cent of Lloyds’ mortgage assets set out in the state aid agreement”, and that the sale would therefore need altering.

However, Lloyds chief António Horta-Osório revealed yesterday that several interested parties in the sale “have expressed interest” in buying fewer assets in order to shrink the package’s £30bn funding gap.

He also appeared to suggest that Lloyds has recently had more positive discussions with the ICB on the topic, a marked shift from previous statements.