THE sale of 632 branches of Lloyds to the Co-op bank has run into trouble as financial regulators question the level of expertise on the board of the buyer.
The Co-op, which is Lloyds’ preferred choice for the sale, reportedly held talks with Gary Hoffman, chief executive of bid rival NBNK and former boss of Northern Rock, about joining to address the lack of banking experts.
The discussions between Hoffman and the Co-op reportedly ended badly and the issue has threatened the takeover, which would transform the Co-op into a major banking competitor in Britain.
The Co-op is still looking for appropriate talent to satisfy the Financial Services Authority that it has a suitably experienced team to run the enlarged group should it complete the purchase of the Lloyds branches.
Lloyds is being forced to divest the branches following the £20 billion in state aid it received after the 2008 financial crisis.
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The assets being sold account for a 4.6% share of the UK current account market and up to 19% of the group's mortgage book. There are 5m customers and an estimated 9,000 employees.
The disposal plan is thought to be a way of introducing a stronger challenger to the big five banking groups.
The bids by the Co-op and NBNK were thought to have been in the region of £1.5 billion, but the Co-op was seen as slight favourite because it runs a sizeable bank.
It acquired Britannia in 2009 and has 343 branches and 6.5m customers, including in current accounts, mortgages and credit cards. Virgin Money, which secured Northern Rock for £747m, was also reportedly involved in the auction.