Lloyds TSB has run into trouble attempting to unload a large number of its branches to prospective buyers, who have expressed either uncertainty or inadequate terms as souring them on the deal.
Lloyds had agreed to sell the branches as part of a deal with EU regulators, forcing them to give up 185 Scottish branches and the TSB brand, but so far the bids have been less than enthusiastic, leading Lloyds to extend the bidding deadline to allow further potential buyers to emerge with their own offers. So far large banking institutions include both foreign and domestic, such as NAB and Yorkshire and Coventry Building Societies, have declined the nearly $5 billion price for that segment of the portfolio. In fact only two organizations, allegedly, NBNK and Co-op Bank, have actually presented offers for the sale, out of the six that were in discussions to do so.
Analysts have said the situation has implied that businesses are less than confident about the prospects of the UK banking sector, as well as the broader global economy, which has run into quite a bit of difficulty in recent years, despite a gradual recovery, though emerging markets seem to be leading that trend. Lloyds is also selling off Northern Rock, which has been almost entirely nationalized due to the financial crisis and bailouts following the economic crisis, with speculation saying that Virgin may buy the ailing banking organization.
Other options include an IPO, and a spinoff of a total of 630 branches, which may prove to be a better option if the deals fail to materialize in a timely fashion.
Other reasons for the failed deal include speculation that the banking industry may be experiencing a shift toward online banks, including the statement that Yorkshire was more interested in online bank Egg rather than taking over the ailing Lloyds assets. Many larger banks have been shuttering doors in certain locations, especially rural ones, due to decreased demand in these areas, likely due to the digitization of banking customers who have little reason to make a trip to the local branch when they have to deal with these issues.
While not necessarily the impetus for the deal falling through in this particular situation, it is nonetheless an inevitable shift of the banking landscape that is only likely to continue, especially as the younger generation who have grown up exclusively during the internet era, and have little or no motivation to switch, and likely a disproportionately low amount of experience doing so. While certainly all banks of any repute offer online services of many kinds, banks that operate exclusively online are likely to supplant a certain portion of the banking sector if they are able to offer better or cheaper services, and don’t have the political baggage, being relatively new organizations, as do some of the larger, more established institutions.
This is not likely to alter the landscape entirely, especially the field of investment banking, as retail is the only one to significantly shift in this regard, at least in the foreseeable future, but it is nonetheless a factor to take into strategic decision making as the banking sector continues to evolve.
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Read about the online offers available from Lloyds TSB online, as well as its potential but perhaps no-longer buyer YBonline.
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