Lloyds group and RBS are ordered to shed assets to boost competition
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Lloyds Banking Group and the Royal Bank of Scotland will have to offload a significant proportion of their retail and corporate banking assets in the next four years under plans announced last week.
The European Commission has ordered the banks to sell off part of their businesses to encourage com-petition in the UK banking sector after both banks received capital injections from the government.
Lloyds group is expected to sell up to 600 branches including all those of Cheltenham & Gloucester and some Lloyds TSB branches in Scotland, as well as its Intelligence Finance business. RBS is expected to sell 318 branches including some NatWest ones in Scotland.
The banks will only be permitted to sell the businesses to new entrants to the banking sector, with Tesco and Virgin Money two of the names in the frame.
Lloyds group has also decided to opt out of the government’s Asset Protection Scheme. It will now raise £21bn through a combination of a £13.5bn rights issue and £7.5bn by swapping debt for contingent capital. The group will pay the government £2.5bn for the protection it has received from taxpayers.
Sir Winfried Bischoff, chairman of Lloyds group, says: “These proposals provide a more attractive, market-based alternative to the protection scheme and offer superior value to shareholders.
“This represents a significant step towards meeting our objective of operating as a private and self- supporting commercial enterprise.”
RBS will join the scheme in return for a capital injection of £25.5bn, taking the government’s share in the bank to around 84%.
Last week Moody’s downgraded Lloyds group’s financial strength rating from C to C- after it revealed it would not be taking part in the asset scheme.
Vince Cable, Liberal Democrat shadow chancellor, says: “Until we can split up banks in a meaningful way so taxpayers will not be forced to underwrite casino activities they should all pay a premium for the support they receive.”
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