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The bank will receive shares equivalent to approximately 1.8 per cent of the total issued share capital as part of the deal.
Lloyds Banking Group have announced that it will sell its Spanish retail banking operations, including Lloyds Bank International S.A.U and Lloyds Investment España SGIIC S.A.U, to Banco Sabadell, S.A (Banco Sabadell).
The sale comprises the Group’s retail and private banking business and the local investment management business in Spain. The business being sold consists mostly of retail mortgages and deposits, with a large portion of non-resident clients. The Group’s Spanish corporate banking operations, serving business clients, are not included in this transaction and will continue to operate as usual.
To ensure continued support for our customers in the Spanish market and in conjunction with the sale the Group argues it is developing a collaboration agreement with Banco Sabadell which it is expected would involve exploring potential business opportunities in areas including retail, commercial, private banking, asset finance and asset management”.
Under the sale agreement, the Group will receive shares equivalent to approximately 1.8 per cent of the total issued share capital of Banco Sabadell as part of the consideration for the sale. The Group intends to be a supportive shareholder of Banco Sabadell and has undertaken to retain the shares received under the sale agreement for a period of at least two years.
In a statement Lloyd’s said that “Total consideration will be payable in a mix of shares and cash. At completion Banco Sabadell will deliver 53.7 million ordinary shares out of their treasury holding with such shares being valued at €84 million (£72 million) by reference to the volume weighted average share price on 26 April 2013. An additional consideration of up to €20 million (£17 million) may be payable in cash within the next five years dependent on mortgage book margins”.
As of 31 March 2013 the total assets of the sale were approximately £1,517 million, comprised almost entirely of customer lending, and customer deposits were approximately £670 million. The business reported a loss of approximately £43 million in 2012, which included an increase in the impairment provision as a percentage of impaired loans to approximately 90 per cent. The sale of the business is currently expected to lead to a loss on disposal of approximately £250 million1 in the Group’s accounts.
The sale is in line with the Group’s strategy of rationalising its international presence and ensuring best value for shareholders. The current senior management employed by Lloyds Bank International S.A.U and all of the staff of the Spanish retail operations will move across with the subsidiaries on sale. Any cash proceeds of the sale will be used for general corporate purposes.
The sale is subject to regulatory approval and is expected to complete in 2013.
