It rather looks as though Lloyds Banking Group has found a buyer for the 630 branches that the European Commission has obliged it to sell. The only name left in the frame is the Co-Operative Bank, which is said to have won – if that’s the word – preferred bidder status. It’s in danger of finding itself the proud owner.

The Co-Op has had rather a good credit war, so far. It stayed out of the worst of the derivatives madness, quietly rescued the Britannia Building Society and felt no urge to conquer the world outside the UK. The result is comfortably manageable bad debts and a decent-looking balance sheet.

One legacy of the Britannia takeover was its PIBS, which were converted into Co-Op Bank 13% perpetual subordinated bonds. I’ve got a small holding dating from that takeover and have enjoyed the 10% yield on the purchase price. Now I’m getting worried, and I’m not the only one. The price had risen to £156% in May this year, as the market appreciated the resilience of the co-operative model. As the rumours of the Lloyds bid started, the price started to sink.

It’s now back down to my purchase price of £130%. The Co-Op may be about to pay £1.5 billion for the Lloyds cast-off branches, and it’s far from obvious how the bank, with no access to the equity markets, will pay for them without severe damage to its balance sheet. It’s still not to late to gazunder Lloyds, which richly deserves it, and cut the price to bargain sub-basement levels, or even walk away.

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