The Bankwatch

Tracking the consumer evolution of financial services

Its an uphill battle to sell existing branches

It’s a sad state of affairs to see the once proud and risk averse Lloyds Bank having trouble with a financial minnow as one of the last decent opportunities to sell its branch network. 

Lloyds to miss branch sale deadline | ft.com
A particular sticking point has been the discussions between the Co-op and the financial regulator, which is yet to be convinced the mutual has the appropriate governance and systems in place to run a much bigger banking business.

Relevance to Bankwatch:

The enforced sale of branches serves to highlight the reality that a capital intensive branch network located in areas that reflect 10 – 20 year old demographic analysis is just not that attractive.  Branch locations are based on either historic account traction, or new ability to rapidly grow deposits. 

Neither of those considerations work for new entrants purchasing an existing network. 

  1. Branches in established neighborhoods which probably comprise the majority of Lloyds, have customers used to Lloyds.  A switch to another provider such as Co-op will produce dramatic changes, and will be targetted by competition.  Run off will be great.
  2. Branches located in growth neighborhoods where people are seeking a new bank would be attractive, but the existing Lloyds network will have few of those.  This debacle began in 2008, or 4 years ago, so any newness has worn off.

The value of those existing branches lies only with the sellor I would argue.  Buyer value is going to be in knock down prices.

Written by Colin Henderson

March 22, 2012 at 22:50

Posted in Uncategorized

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