Lloyds' branch sale to Co-op falls through.
The planned sale of 632 UK bank branches by Lloyds Banking Group to the Co-op group has fallen through.
The Co-op blamed the continued economic downturn and tougher regulatory environment imposed on banks.
Lloyds said it will now seek to sell the branches as a stand-alone bank through a stock market listing.
It had been hoped that the Co-op's purchase of the branches would create a bigger competitor to the main high street banks.
Lloyds' chief executive Antonio Horta-Osorio said: "We are disappointed that the Co-operative Group is unable to complete this transaction."
The sales of the branches, known as Project Verde, was demanded by European regulators as the price for being bailed out by the UK government during the financial crisis.
The Lloyds statement said: "The Co-operative Group's board has decided that they can no longer proceed with a purchase of the Verde business given their view of the impact of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general."
During the summer the branches will be branded as TSB Bank, and the group will operate as a separate business within Lloyds ahead of a sale.
The Co-op's chief executive, Peter Marks, said: "After detailed and thorough consideration of all aspects of the Verde transaction, we have decided, at this time, that it is not in the best interests of our members to proceed with the transaction.
The BBC's business editor, Robert Peston, said the Co-op's
decision was a blow for the Treasury, which has been backing attempts to
create powerful competitors to the UK's big high street banks. He said
that the Co-op will now review the future of its banking business.
Challenger banks Lloyds, which is 39%-owned by the government, had a deadline of November 2013 to complete the sale in order to meet European Commission competition rules. But there have been reports over the past few months that the Co-op was going cool on the acquisition.
A flotation is unlikely to be possible until the second half of 2014, which would mean the UK government and Lloyds asking Brussels to extend its end-2013 deadline for the sale.
Co-op agreed in 2012 to buy the branches.
This involved the potential transfer of 4.6 million customers, including 3.5 million in England and Wales and the remainder in Scotland.
Customers in England and Wales had already received letters telling them of the move and giving them the option to stay with Lloyds. This information is still relevant, as customers of the branches being sold will still become customers of the new TSB Bank.
The aborted takeover would have created Britain's seventh-biggest bank with about 5% of personal current accounts and mortgage market and about 10% of the branch network.
A Treasury spokesman described the Co-op's move as "a commercial matter." However, he stressed that government remained committed to encouraging so-called "Challenger" banks to increase competition on the high street.
The planned sale of 632 UK bank branches by Lloyds Banking Group to the Co-op group has fallen through.
The Co-op blamed the continued economic downturn and tougher regulatory environment imposed on banks.
Lloyds said it will now seek to sell the branches as a stand-alone bank through a stock market listing.
It had been hoped that the Co-op's purchase of the branches would create a bigger competitor to the main high street banks.
Lloyds' chief executive Antonio Horta-Osorio said: "We are disappointed that the Co-operative Group is unable to complete this transaction."
The sales of the branches, known as Project Verde, was demanded by European regulators as the price for being bailed out by the UK government during the financial crisis.
The Lloyds statement said: "The Co-operative Group's board has decided that they can no longer proceed with a purchase of the Verde business given their view of the impact of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general."
During the summer the branches will be branded as TSB Bank, and the group will operate as a separate business within Lloyds ahead of a sale.
The Co-op's chief executive, Peter Marks, said: "After detailed and thorough consideration of all aspects of the Verde transaction, we have decided, at this time, that it is not in the best interests of our members to proceed with the transaction.
"Against the backdrop of the current economic
environment, the worsened outlook for economic growth and the increasing
regulatory requirements on the financial services sector in general,
the Verde transaction would not currently deliver a suitable return for
our members within a reasonable timeframe and with an acceptable level
of risk."
Challenger banks Lloyds, which is 39%-owned by the government, had a deadline of November 2013 to complete the sale in order to meet European Commission competition rules. But there have been reports over the past few months that the Co-op was going cool on the acquisition.
A flotation is unlikely to be possible until the second half of 2014, which would mean the UK government and Lloyds asking Brussels to extend its end-2013 deadline for the sale.
Co-op agreed in 2012 to buy the branches.
This involved the potential transfer of 4.6 million customers, including 3.5 million in England and Wales and the remainder in Scotland.
Customers in England and Wales had already received letters telling them of the move and giving them the option to stay with Lloyds. This information is still relevant, as customers of the branches being sold will still become customers of the new TSB Bank.
The aborted takeover would have created Britain's seventh-biggest bank with about 5% of personal current accounts and mortgage market and about 10% of the branch network.
A Treasury spokesman described the Co-op's move as "a commercial matter." However, he stressed that government remained committed to encouraging so-called "Challenger" banks to increase competition on the high street.
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