Who will buy LLoyds and Northern Rock

meatandtwoveg

http://www.telegraph.co.uk/finance/comment/james-quinn/8800302/Lloyds-could-be-forced-to-hang-on-to-Verde-until-the-markets-improve.html


Lloyds could be forced to hang on to Verde until the markets improve
When Antonio Horta-Osorio proclaimed in the Spring that he hoped to identify a final solution for the 632 branches he is being forced to sell by European regulators by the end of the year, the Lloyds Banking Group chief executive could not have predicted what was about to happen.
In the intervening period, equity markets have plunged as worries about the future of the eurozone continue, knocking bank shares and restricting access to the wholesale markets.
Although there may not have been any major banking failures in this particular part of the long-running financial crisis, the impact on banks and finance houses has been noticeable.
Not, then, the perfect climate in which to sell off what could be a ready-made bank, and certainly not a ready-make bank with a £15bn to £20bn funding gap.
Little surprise then that as of Friday night, only one second round bid, from Gary Hoffman's NBNK, had been received by JP Morgan and Citigroup, the banks running the sales process. Not quite the 10 or so Lloyds had been hoping for when the process began.
Of course, the Co-op and Hugh Osmond's Sun Capital remain very much in the race as the second round "deadline" seems to have become very flexible indeed.
But each have their own reasons for not bidding yet. The Co-op – seen by many as the likely victor due not only to its existing branch network but its proven track record of integration following its 2009 merger with the Britannia building society – is still carrying out due diligence, ploughing through thousands of pages of financial and other information on the assets in play.
This information flow is believed to have been quite slow to begin with, but has speeded up as it has become increasingly evident that a sale is by no means a certainty.
One of the conundrums Co-op chief executive Peter Marks's team is believed to be struggling with is the plethora of brands contained within the Verde pot. In addition to the TSB and IF brands, many of the branches are from the Cheltenham & Gloucester estate. When the Co-op bought the Britannia, it kept the name as it believed it had a certain resonance with customers.
For Marks, cementing the Verde technology platform with that of the Co-op is not necessarily an obstacle, given the bank has already committed to a £700m technology investment plan to build a new platform by the end of 2013.
For Osmond, however, it is understood that technology is something of an issue. More specifically, there appears to be a discrepancy between what Lloyds believes will be the cost of extricating Verde's systems from Lloyds and placing it on a new platform, and what Sun Capital thinks it might cost. Unsurprisingly perhaps, Sun Capital believes it will cost a great deal more than Lloyds, and so is likely to want to pay less upfront as a result. If, of course, it even makes a bid.
The bid Lloyds has received, from NBNK, is some £1bn south of the £2.5bn to £3bn range the bank was suggesting the asset was worth before the process began. If a sale does take place one source close to the process suggested that none of the bids are likely to come in above £2bn.
That alone is a big if. The reserve option, to divest the business via a stock market flotation, seems highly unlikely given the state of the capital markets and the fact that Lloyds shareholders might not appreciate being given shares in a second-tier high street bank where only one-third of the branches are thought to be profitable.
More likely at this stage, if the sale does not achieve sufficient return, is that Verde will continue to be run as an independent unit, and a sale attempted in late 2012 when the markets may have picked up a little. Horta-Osorio may have to wait a little bit longer than he expected before declaring the Verde conundrum resolved.

[EMAIL="james.quinn@telegraph.co.uk"]james.quinn@telegraph.co.uk[/EMAIL]

@jamesrquinn

Thrugelmir

pqrdef wrote: »

If NBNK or Sun get the deal, it's only a matter of time before they get swallowed up by a big foreign bank.

If there was interest. The 632 branches would have snapped up.

More likely though its the £65 billion mortgage book that's of no interest. Low margin, low profit business. With a high probability of regulatory interference.

Thrugelmir

meatandtwoveg wrote: »

Lloyds could be forced to hang on to Verde until the markets improve

Or continue to contract the operation to comply with the EU's remit.

Chadsman

I had thought Sun were slipping behind in the race to buy Verde but...

Tata Backs Lloyds Branches Bid

http://blogs.news.sky.com/kleinman/Post:991f0d6b-d009-4a5a-862b-4ca5b9f1d217

Chadsman

Neil Collins blog at the FT advocates demerging Halifax from Lloyds
http://ftalphaville.ft.com/blog/2011/09/30/690456/

Joe_Bloggs

No one seems to mention that NBNK shares have been suspended for quite a while. The markets have plummeted in the interim.
J_B.

opinions4u

Chadsman wrote: »

Neil Collins blog at the FT advocates demerging Halifax from Lloyds
http://ftalphaville.ft.com/blog/2011/09/30/690456/

From a competition viewpoint, he's right.

Thrugelmir

Joe_Bloggs wrote: »

No one seems to mention that NBNK shares have been suspended for quite a while. The markets have plummeted in the interim.
J_B.

Hardly surprising when it had a market capitalisation of only £45 million pre bid.

.

pqrdef

Chadsman wrote: »

Neil Collins blog at the FT advocates demerging Halifax from Lloyds

I'm sure Lloyds shareholders would be delighted if HBOS were to go away and take all its losses with it.

They might be less happy about being stuck with HBOS's losses while not even owning the bank.

opinions4u

pqrdef wrote: »

I'm sure Lloyds shareholders would be delighted if HBOS were to go away and take all its losses with it.

They might be less happy about being stuck with HBOS's losses while not even owning the bank.

One of many reasons why it won't actually happen.

At the end of the day, those losses have more or less been absorbed now.

Any value generated by spinning off a clean Halifax (as opposed to HBOS) would benefit those same shareholders.