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Low margins on Lloyds' divestment

15 June 2011 4:45PM
A few details of the Lloyds Banking Group information memorandum sent out to prospective buyers of a portion of its UK retail banking business -  known by the working title of Verde - are dribbling out in the British media. Ten interested parties received the document, Sky News reports.BBC reported that Lloyds is selling 632 branches, equivalent to 22 per cent of the bank's branch network. These branches deliver around nine per cent of Lloyds' profit.Lloyds is selling £68 billion worth of assets, largely mortgages, as well as customer deposits of £35 billion, the BBC reported. This leaves a funding gap of more than £30 billion. In March, Lloyds outlined a willingness to cover £20 billion in funding, provided by itself, Citi and JP Morgan.BBC also reported that the information memorandum confirms that Lloyds may increase the number of branches (and loans and deposits) it sells if the UK Government adopts the  Independent Commission on Banking's recommendation, which suggests Lloyds sells around 1000 branches.The list of the 10 recipients of the information memorandum presumably includes National Australia Bank.On Monday, Sky News reported that NAB continues to hold talks with NBNK, an investment company formed for the purposes of bidding on bank divestitures in the UK.In one scenario, NAB may fold its Clydesdale Bank business into the Lloyds' Verde portfolio, with funding from NBNK, with the latter listing on the London Stock Exchange if it's successful.One new rumoured recipient of the detailed financials, as reported by Sky, is the Bank of China.

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