Wednesday, November 04, 2009

Making Lloyds get rid of branches they wanted to close anyway

It's hardly surprising the share price of Lloyds benefited from the announcement today on cash injection and branch sales and closures. The company is almost certainly of the view that it has vastly more branches than it needs, now that HBOS has been absorbed into it. There must be hundred of Lloyds branches sitting near a Halifax. This duplication would not have continued, even if it had not been an EU requirement for additional state aid to get rid of them.

Earlier this year Lloyds announced that the entire Cheltenham and Gloucester branch network would close. Months later the closure plan was abandoned though I have a suspicion that the cancellation was forced on them so that the mortgage wing of Lloyds could be sold off with a high street presence of its own. So Lloyds gets to dump the troublesome branches after all. Okay, so the mortgage wing will have to be demerged and sold off but Lloyds could still continue to sell C&G mortgages if it turns out to be financially beneficial to do so. C&G after all has only a limited high street presence of its own so it will not want to lose the extensive reach it has by being sold through Lloyds branches. Lloyds benefits by not having to pay for the network they had initially planned to close anyway.

So, the EU and the government have provided Lloyds with the excuses for dumping a huge number of branches, many of which the company will see as a drain on its resources. No wonder the share price has gone up.
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