July 23 2014 Latest news:

The deal that has seen the Co-operative Group buy more than 600 Lloyds Banking Group branches has been hailed as “the biggest shake-up in high street banking for a generation”.

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The £750m purchase of the 632 branches will involve the transfer of about 4.8 million customers to the Co-op, taking its market share from 2pc to nearly 7pc, and will triple the size of its branch network, to nearly 1,000 branches.

However, the deal – which will cost the Co-op £350m now and a potential further £400m over the next 15 years – represents only half the original £1.5bn price tag, with taxpayer-backed Lloyds admitting it had made a loss on the sale.

About 8,000 staff are expected to transfer as part of the deal.

Lloyds has had to offload the branches to meet EU rules on state aid following its government bailout at the height of the financial crisis.

“The announcement from Lloyds Banking Group to sell 632 branches to the Co-op is groundbreaking news for the banking sector and will no doubt increase competition among the banks,” said Moneyfacts.co.uk spokesman Rachel Springall.

“Additional branches will be great news not only to the Co-op’s loyal customers but also to prospective new customers looking to make a move from their existing bank.

“While the acquisition still needs Financial Services Authority approval, this move should make competitors sit up and take notice.

“The Co-op already offers a range of current accounts, credit cards, savings and mortgages. A selection of their fixed savings and fixed mortgages appear in our best buys, as do their current accounts for low overdraft interest.”

Michael Ossei, of Uswitch.com, said: “This is a massive deal that will well and truly put the Co-op on the banking map.

“We’ve seen other new banking entrants such as M&S Money and Asda make a splash recently with new launches, but this is really going to make the high-street banks sit up and pay attention as the Co-op has gained almost five million new customers as well as a high-street presence.

“And with eight out of 10 consumers saying they would consider switching to a new provider and 69pc saying they are looking for a bank that is ethical, the Co-op is in a unique position to mop up the competition and gain new customers by offering a real alternative.”

Richard Lloyd, executive director of consumer group Which?, said the news was a “a welcome first step”, but added: “If banking is to be truly competitive, portable account numbers need to be introduced to make it as easy to switch your bank as it is to switch your mobile phone.

“It’s important to also remember that this sale was forced on Lloyds by the European Commission.

“It doesn’t remove the need for a referral to the Competition Commission, which should be done now to break the dominance of the big banks that so often fail to put consumers first.”

Some assets originally thought to be included in the deal have been dropped, such as the Intelligent Finance internet banking business. It is thought Lloyds will now close the IF business, as it was earmarked to go as part of divestments to appease the EU.

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