NBNK Puts in Second Round Bid for Lloyds Branches

British bank venture NBNK has submitted a second-round bid for about 630 Lloyds bank branches, Reuters reported Wednesday. Sun Capital and Co-Operative Financial Services have yet to put in second-round offers. The branches – put up for sale following a British government bailout during the credit crisis – are expected to fetch some 1.5 billion pounds ($2.3 billion). Britain ended up with a 40.6% stake in Lloyds following the bailout, Reuters wrote.

(Reuters) – New British bank venture NBNK has submitted a second-round bid to buy some 630 Lloyds bank branches which could fetch 1.5 billion pounds ($2.3 billion), sources with knowledge of the matter said.

Rival bidders, Sun Capital and Co-Operative Financial Services, for the branches — up for sale as payback after Lloyds received a British government bailout during the credit crisis — have yet to put in formal second-round offers.

“We have submitted an independent, second-round bid,” said one source close to NBNK, which last year was set up by Lloyd’s of London insurance chairman Peter Levene.

Britain ended up with a 40.6 percent stake in Lloyds and 83 percent of Royal Bank of Scotland after rescuing both banks during the credit crisis with taxpayer bailouts, and RBS has also been told to sell off a host of assets.

Although Sun Capital and Co-Operative Financial Services have not yet submitted a second-round bids, Lloyds has not set a deadline which means the two can still put in offers in the weeks to come, added another source involved in the process.

BRITAIN’S 7th-BIGGEST BANK

The auction — codenamed “Project Verde” — offers a chance to create Britain’s seventh-biggest bank in one fell swoop.

The sale includes 4.6 percent of personal current accounts and 5 percent of the mortgage market, contributing about 500 million pounds of pretax profit in 2008 and income of about 1.4 billion.

NBNK will exercise an option to buy fewer mortgages and other loans than were originally on offer, since tough credit market conditions have made it hard for any bidder to borrow on the market to finance the larger portfolio of loans.

“As a result of getting more information, we’ve opted for a smaller asset package,” added the source.

Co-Operative Financial Services said it was still in the running for the assets, while sources said Sun Capital remained in the frame.

“We remain in constructive discussions with Lloyds Banking Group,” said a Co-Operative Financial Services spokesman.

Lloyds has said it hopes to find a buyer for the branches by the end of this year, and that it could also choose to spin-off those branches if it fails to agree on a sale.

Levene told Reuters this month that NBNK’s lack of banking technology and infrastructure would not be an obstacle in its bid for the Lloyds branches, and that NBNK’s investors could fund any eventual deal for the assets. ($1=0.637 British Pounds) (Reporting by Sudip Kar-Gupta; Editing by Mike Nesbit)