New British banking venture NBNK has made a fresh bid for 632 Lloyds bank branches, putting it back in a race with shops-to-banking group The Co-Op, whose offer has run into regulatory problems.
NBNK said it was offering an alternative demerger plan for the Lloyds branches, which are estimated to be worth between 1-1.5 billion pounds ($1.6-2.4 billion).
It wants to buy the branches and potentially float them so that Lloyds' shareholders -- including the UK taxpayer -- could receive cash and/or shares in a new, listed banking group.
Lloyds has been ordered by European regulators to sell the branches by November 2013 as payback for a bail-out with taxpayers' money during the 2008 credit crisis, which left Britain owning a 40 percent stake in Lloyds.
NBNK has not yet started talks with Lloyds due to the exclusivity period between Lloyds and Co-Op.
NBNK, which has a current market capitalisation of around 45 million pounds, is confident it can raise the money to pull off a Lloyds branch deal.
We have strong support from investors in achieving our objectives and we are confident that we can raise the money, obviously at the right price, Chief Executive Gary Hoffman told Reuters. The one thing I won't talk about is the price that we've offered, he said, adding that people had speculated that this could involve a fundraising of up to 2 billion pounds.
Hoffman also said the assets could be worth in excess of 1.5 billion pounds.
Lloyds shares were up 1.7 percent in early afternoon trade, outperforming a flat European banking sector and a 0.4 percent rise in Britain's benchmark FTSE 100 index.
The details of NBNK's offer are sketchy. As a trade buyer with an existing business, it would make more sense to do a deal with the Co-Op, but I don't think the Co-Op can actually deliver, said Shore Capital analyst Gary Greenwood.
Lloyds said it remained in exclusive talks with Co-Op. NBNK had lost out on the deal last year when Co-Op became the preferred bidder.
But both Lloyds and Co-Op said last month that the deal was proving complicated and Co-Op warned it could walk away.
Britain's financial regulator raised concerns that Co-Op, which is yet to appoint a chief executive for its financial services division, lacked the necessary experience to manage one of the country's biggest retail banking networks.
A sale of the Lloyds retail branches would create Britain's seventh-biggest bank, and as such this has attracted a lot of scrutiny from British authorities.
It would mark an important step in Britain's plans to sell its 40 percent Lloyds stake and 82 percent holding in rival bailed-out lender Royal Bank of Scotland back to the private sector.
NBNK pledged that its plan would not result in any redundancies or branch closures, and that NBNK had the necessary skills to integrate the various banking software systems.
Hoffman was also confident that a stock market listing of the new bank would attract investors, despite market volatility.
If you invest in Barclays, HSBC, or RBS or Lloyds, then only about 20 pence of every pound you invest goes into UK retail banking. The rest goes into investment banking or asset management or corporate banking or Brazil or Greece or Spain or Italy or whatever, he said.
Over many years, the returns in UK retail banking have been much higher than group returns. If you can produce a pure UK retail play, with very good ROE (return on equity), without dilution coming from the rest of the group, then it is an attractive proposition for investors, he added.
NBNK was set up in 2010 by former Lloyd's of London insurance head Peter Levene to buy up British banking assets.
It has been also linked with a takeover of the British operations of Australia's NAB.
Hoffman declined to comment on NAB but said NBNK would have to close if it failed to pull off a takeover.
Ultimately, if there is a not a large acquisition available, we would close.
($1 = 0.6288 British pounds)
(Additional reporting by Steve Slater. Editing by Jane Merriman)