Lloyds Banking Group (LYG) Thursday said it was adding a number of sites and jobs to the retail branch network that it is in the final stages of selling to The Co-operative Group.

The bank said that around 1,400 existing employees in five U.K. locations providing telephony, banking operations and mortgage-center support will form part of the 632 branches and 1,400 staff that are already included in the business being sold, also known as Verde.

In addition, the bank is recruiting 500 new employees for the overall Verde business.

Lloyds said the additional sites and jobs formed part of the business and had been part of its discussions with the Co-op.

The Co-op was chosen as preferred bidder for Verde in December over rival NBNK Investments PLC (NBNK.LN). Both offers valued the business at around GBP1.5 billion.

Thursday, Lloyds confirmed that a flotation of the business remains an option and that a decision on this would be made in the second quarter.

"We are shaping the business for a sale or an IPO and will give clarity in Q2," a bank spokeswoman told Dow Jones Newswires.

A spokesman for the Co-op declined to comment. The group will update the market when it reports annual earnings March 29.

Meanwhile, the Co-op remains in discussions with both Lloyds and the Financial Services Authority over its unusual mutual structure--in particular, the group's boards are made up of members rather than company executives and non-executive directors.

One option on the table would involve making the whole group--which comprises a retail and legal and insurance services as well as a bank network--an FSA-regulated entity. This would likely involve higher capital requirements, possibley across the group.

Another possibility would be to ring-fence the bank, which has its own 14-strong board, from the rest of the group. The Co-op is currently looking for a new chief executive for its banking group.

Analysts and industry experts have previously expressed concerns over the ability of the Co-op to absorb a large retail network while it has yet to complete the integration of the Britannia Building Society that it bought in 2009.

-By Marietta Cauchi, Dow Jones Newswires; +44 207 842 9241; marietta.cauchi@dowjones.com

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