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May 25, 2011 11:01 pm
Sir Richard met António Horta-Osório, Lloyds chief executive, on Tuesday and plans to make a formal bid in July for the 600 branches the bank has to sell. “This can happen quickly and smoothly,” he told the Financial Times. “We are a serious bidder and can give the government what it wants through competition.”
Politicians are keen to encourage new entrants such as Virgin Money, Sir Richard’s financial services business, into the banking sector to break up the dominant market shares held by the top-four providers. “There should be dozens of banks, not just four or five,” Andrea Leadsom, an MP and member of the Treasury select committee, told the FT on Wednesday.
The government-appointed Independent Commission on Banking has recommended Lloyds be forced to dispose of many more branches than the 600 it must sell under state-aid rules to boost competition.
But Sir Richard would be satisfied with the existing portfolio of 600 branches, which would transform Virgin Money into the UK’s sixth-biggest bank. “We appreciate what the commission is saying but we don’t want to delay the process,” he said. “We think we can build a formidable competitor with 600 and would almost rather they didn’t muddy the water.”
Led by Jayne-Anne Gadhia, chief executive, Virgin Money has held talks with a “handful” of UK and US investors and expects to have financing of up to £3bn in place by the end of July. Virgin Money will also “look seriously” at Northern Rock, which it attempted to buy in 2007 shortly before the lender was nationalised.
The Lloyds disposal would provide far greater scale to a new entrant, giving it a branch network almost 10 times larger than Northern Rock’s. It is also likely to attract interest from National Australia Bank, which owns Clydesdale and Yorkshire banks, and NBNK, a vehicle set up by Lord Levene to buy state-owned banking assets. The Co-Operative Bank is another possible bidder.
The largest UK banks are prohibited from bidding on competition grounds.
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