Given the bad press that the banking industry has attracted in recent months (read: decades), the Co-op's plans to acquire 632 branches from Lloyds makes for quite exciting reading. At the moment the document which has been agreed consists of non-binding heads of terms, but if the deal goes through, the Co-op would be a 1,000-branch high street bank, creating a pretty serious challenge for the big five which currently dominate the market.
The Co-op has spent a couple of years pushing its wholesome, responsible-looking brand. In a TV ad campaign that has just run and run, it has ditched the ‘Co-op’ nickname, and gone for the altogether cleaner sounding ‘the co-operative. Good, with food.’ Who can help but be seduced by the dulcet tones of the friendly Scot doing the voiceover? With that kind of branding in place with food, we reckon they’re counting on transferring some of that customer trust over to the money side of things. The friendly bank, so to speak. Pah!
Getting seriously into the banking market will be made easier for the Co-op if this deal comes off: the 632 branches from Lloyds will give the Co-op 4.8m customers at a stroke. In a statement, it was keen to extol the virtues of banking under a co-operative model: ‘[The Co-op will be] differentiated through the quality of its customer-centric, member-led, ethically driven banking model.’ Sounds absolutely superb! But it is reminiscent of what the old-fashioned building societies used to say, too, before they bribed their members with a payout to get popular support for de-mutualising.
Don’t be under any illusion that Lloyds wants to offload the branches, either. It is only thanks to the fact that its parent, HBOS, had to be bought out by the taxpayer at the height of the financial crisis, prompting European regulators to demand the sale of a swathe of Lloyds branches. If the government kept hold of the business as it was, it would effectively constitute state support of an industry to levels that are deemed excessive by competition regulators in Brussels.
Completion of the transaction is expected to be some time toward the end of 2013, and still needs to be approved by the FSA, the Treasury and the European Commission. No doubt it’s a good thing to get another player in the market, and with the recent addition of Metro Bank too, the optimist might well expect an upturn in quality of service across the financial sector. But we’re not holding our breath…