The pair have agreed on the commercial terms of the transaction and are now proceeding in exclusive talks for the sale of the Project Verde business.
In an announcement on the London Stock Exchange yesterday, Lloyds announced it has ended talks with rival bidder NBNK, which will now be wound up.
In a statement NBNK Investments said there were no other UK banking assets available which would meet the company’s objective and has begun to take steps to wind-up the company.
Gary Hoffman, chief executive of NBNK Investments, says: “We are disappointed that the door has now been closed on this opportunity, with the result that we will be unable to deliver our vision of banking, bringing a vibrant new challenger to the high street, devoted to providing the level of service that customers want and deserve.”
The Project Verde business has almost five million customers and represents 6 per cent of all bank branches in the UK. If combined with the Co-op business, it will have 7% of the total market for current accounts in the country.
This deal for the Project Verde business is subject to agreeing satisfactory documentation, the approval of the respective boards of Lloyds and Co-op, and further discussions with the FSA, the Treasury and the European Commission.
Co-op has been the preferred bidder for the Project Verde business for some time, however it lost its exclusivity agreement with Lloyds last month.
The FSA has reportedly had concerns with the Co-op deal, citing the complex structure of the group. There have also been reports that the regulator may call for the Co-op to hold an additional £3bn of capital at group level.
Lloyds’ branch disposal, named by the bank as ‘Project Verde’, is a requirement by the European Commission as part of Lloyds receiving state aid in 2008.