The Co-operative (Coop) Bank will become
the UK’s sixth-largest bank by branches as a result of agreeing a
deal to snap up 632 branches from Lloyds Banking Group.

A statement from the Coop and Lloyds said
that the respective banks were now working towards agreeing
definitive, binding documentation, subject to the satisfactory
completion of further due diligence and Board approvals.

The banks will aim to close the deal
before the end of November next year.

At first glance, the deal represents a
bargain for the Coop.

The Coop is paying only £350m up-front for
the branches with up to a further £400m based on the performance of
the branches over the next 15 years.

Once the deal concludes, the Coop will
have a UK current account market share of around 7%.

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The Coop Bank customer numbers will grow
to around 11m.

Peter Marks, group chief executive of The
Co-operative Group, said:

“We’re delighted to be announcing that we
have reached agreement in principle with Lloyds Banking Group on
the terms of this important and transformational

This deal would deliver the biggest
shake-up in high street banking in a generation. Consequently, we
believe this would be a great deal for customers, for the public,
for UK banking generally and for The Co-operative Group, in

Lloyds Banking Group
will remain the largest UK bank by branches with a reduced network
of around 2,200 outlets, ahead of Royal Bank of Scotland/NatWest
(RBS) with approximately 1,900 units.

Santander will rank
third with 1,700 (once it finalises a deal to snap up over 300
branches from RBSL, ahead of Barclays with 1,630.

HSBC will remain the
fifth-largest bank by UK branches with 1,350 ahead of the Coop with
around 970 outlets. Nationwide with 700 and National Australia Bank
(under the Clydesdale Bank and Yorkshire Bank brands) with 340
outlets round off the top eight.