strictly private and confidential lloyds banking … · held at 25 gresham street, london, ec2v 7hn...

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STRICTLY PRIVATE AND CONFIDENTIAL

LLOYDS BANKING GROUP plc

Extract of Minutes of a meeting of the Board of Directors held at 25 Gresham Street, London, EC2V 7HN

on Thursday 14 April 2011

B2011/56 GROUP CHIEF EXECUTIVE’S REPORT Mr Horta-Osório commented on a range of issues. Short term priorities for the Group, included completion of the Strategic Review; implementing the recently announced management reorganisation; continuing Integration; accelerating deleveraging and funding activities; managing the ICB process; accelerating Project Verde; and assessing the key risks facing the business….. The Project Verde disposal process had been accelerated. M&A advisors had been appointed and had agreed, in principle, to provide incremental funding to DivestCo. A “teaser” document had been issued to potentially interested parties – and the full Information Memorandum would be issued in late May or early June. As Integration resources were freed up these would increasingly be dedicated to Project Verde. The IPO option was being preserved, as a credible alternative to a trade sale. It was believed that there was potential investor appetite, should it prove necessary or appropriate to pursue the IPO route.

B2011/58 PUBLIC POLICY UPDATE: INDEPENDENT COMMISSION ON BANKING There had been significant debate concerning the ICB’s Interim Report over dinner on the previous evening…. ….ICB had made specific reference to the Group in relation to its alleged competition concerns, and the proposal that an appropriate remedy would be for the Group to agree to make a “substantial enhancement” to the scale of the proposed Project Verde divestment. The Commission had not defined “substantial” in the Report, and had refused to elaborate on what it meant by ‘substantial’, despite being pressed by the Group, and other audience. The potential implications of any meaningful extension of Project Verde had been discussed in detail over dinner. There was no good reason why the Group should agree to make any enhancements to the scope or scale of Project Verde, and several good reasons why it should refuse to do so. Any amendment to the package of measures agreed with the European Commission could adversely impact the Group’s ability to find an acceptable buyer, or complete a sale within the agreed timescale; could have significant adverse value implications; and could have significant adverse implications for the Group’s ongoing operations, post the divestment…..

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B2011/59 PUBLIC POLICY UPDATE: VERDE Mr Lorenzo updated the Board with respect to the Project Verde disposal process and the timeline towards identification of and interaction with potentially interested purchasers. Achieving a satisfactory trade sale would not be straightforward, in particular with a party that had existing appropriate systems capability. If the preferred buyer needed the Group to provide systems capability, the cost, effort and complexity for the Group would be significant. Realistically, there would be a limited number of credible buyers. Technical and other discussions had been taking place with potentially interested parties. A “teaser” document had already been issued to potentially interested parties, which will be followed by the issue of a fuller Information Memorandum, in late May, or early June. The funding position was complex, and would be even more complex if additional branches were added. The business to be divested, could not (under the terms of the EU term sheet) have a stronger customer loan:deposit ratio than the remainder of the Group. Even so, the impact on the Group would quickly become disproportionately adverse, destroy value, and damage the Group’s future potential, if the scale of the proposed Verde divestiture was increased beyond that agreed with the EU. An IPO process would run in parallel with the trade sale process, in case the trade sale was not achievable and/or to help ensure there was appropriate tension in the sales process. Ultimately, it might be necessary for a combination between different players to be agreed in order to make progress. This could also help resolve the ICB’s and Government’s apparent concerns but could significantly increase complexity, and execution risk. The Board would be kept advised of developments.

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Extract of Minutes of a meeting of the Board of Directors held at 1 Devonshire Gardens, Glasgow

on Tuesday 17 May 2011 commencing at 4.30pm

B2011/087 GROUP CHIEF EXECUTIVE’S REPORT Mr Horta-Osório commented on:

• the status with respect to key short term priorities. Good progress continued to be made with respect to Integration; the Project Verde disposal process had been accelerated; and the management reorganisation was being implemented;

• Project Verde, which again would be dealt with later in the agenda. The “IPO/spin off” scenario was being retained, to present a credible alternative to a trade sale. Buyer interest was relatively disappointing, although a (limited) number of buyers had shown real interest. The EU was aware of the position;

In relation to Project Verde, the imminent announcement of the Verde senior management team would add to the credibility of the Verde disposal, particularly with respect to the potential IPO or demerger option. Mr Scicluna queried the position with respect to major shareholders, their views, and potential ability to influence the outcome with respect to the ICB and Verde. The Chairman confirmed that a number of major shareholders had made submissions to the ICB, and were concerned about value loss – particularly if the Verde disposal were to be ‘enhanced’.

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Minutes of a meeting of the Board of Directors held at 25 Gresham Street, London

on Wednesday 22 June 2011

B2011/109 GROUP CHIEF EXECUTIVE’S REPORT Mr Horta-Osório commented on:

• Project Verde, including the progress made, the process and timelines. The Board noted that the Information Memorandum had been issued to eight interested parties on 11 June 2011 with indicative bids required by 11 July 2011. The Board discussed the position. It noted the considerable operational challenge that the divestment presented and the importance of not letting it detract from the implementation of the strategic review. In the course of discussion, the following questions arose: - Sir Julian Horn Smith asked whether there was any merit in

reaching a view on valuation prior to bids being received. The Board considered the various factors that would influence the price eg capital, the extent to which LBG would be required to support the purchaser’s infrastructure, outcome of the Independent Commissioners’ for Banking (ICB) review etc. It agreed, however, that any valuation would be hypothetical; the EU mandate meant that there was, in any case, pressure to proceed at this stage. Mr Watson asked what steps were being taken to prepare for an Initial Public Offering (IPO) if a purchaser could not be found and whether there was any intention to prepare a business case on which approach would generate the best return for the Group. Mr Horta-Osório explained the steps being taken as part of the contingency planning. The Board noted that there were currently no plans to produce a valuation for comparative purposes;

- Mr Moreno asked whether demerger remained an alternative if no buyer could be found. Non executive directors were interested to know whether there was a Plan B. Mr Horta-Osório explained the action being taken to identify alternative options but confirmed that finding a suitable purchaser in accordance with the EU mandate was the main priority.

- Mr Scicluna asked whether the sale of Northern Rock would help Project Verde, in particular whether the Northern Rock and Verde sales could be combined to produce a larger competitor. Mr Horta-Osório advised that a joint sale was highly unlikely given the scale of any resulting operation. In his view, it was more likely to limit the number of potential bidders. He confirmed that there was no appetite from potential bidders to take on more than the 630 Verde branches;

Project Verde was considered further later in the meeting……

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B2011/111 PROJECT VERDE UPDATE

Mr Lorenzo presented an update on Project Verde including an overview of potential bidders, a summary of the bidder screening process, the business plan as detailed in the Information Memorandum, the case for investment including base case balance sheet and profitability and internal governance/review process. He also explained the approach taken to identifying the Cheltenham and Gloucester assets to be included in the mortgage portfolio to be sold. The Board discussed the challenges for potential buyers including how they might close the funding gap; cost/income ratio; and the operational capability challenges for the new management.

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Extract of Minutes of a meeting of the Board of Directors held at 25 Gresham Street

on 3 August 2011


This issue had been debated at length over dinner on the previous evening, when Mr Lorenzo had provided the Board with a full update in relation to the sales process; the interest that had been received from a range of potential purchasers; the technical, management, strategic and other competencies of the individual interested parties; and the next steps in the process. A number of parties would be invited into a “second round”, when there would be further due diligence, including management presentations. Technology issues were key, and the technical approach relevant to each potential buyer, and the speed of the Group’s ‘exit’ from needing to support any buyer from a systems perspective, would have a material impact on the relative attractiveness of bids received. It was important to maintain competitive tension in the process. As part of this, the Group would continue preparations for an IPO, as a credible alternative to a trade sale, should an acceptable sale not be achievable. But a trade sale remained the preferred option. The Board would be kept advised of developments.

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Minutes of a meeting of the Board of Directors held at 25 Gresham Street

on 22 September 2011 at 9 am


Mr Lorenzo provided an update with respect to the Project Verde sales process. A number of parties remained interested. Due diligence continued at pace. Key issues for bidders included margin evolution, given low base rates; customer attrition; the funding gap; costs; capital requirements; and IT and Operational capabilities. Discussions would increasingly focus on bidders’ outstanding requirements, ahead of the final few weeks, prior to “binding bids” being requested.

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on 18 November 2011 at 9:30 am

B2011/192 PROJECT VERDE

Mr Lorenzo provided the Board with an updated:

• with respect to the Verde sales process; • with respect to the impact of the weakening economy and

economic prospects on the Verde business. The Verde business was disproportionately adversely affected – in part due to the concentration of C&G SVR capped (200 bps) mortgages in the Verde business. In due course, it might prove appropriate to seek HMT and EU approval to reduce the level of mortgages included in the proposed divestiture.

It was agreed that the Group should continue detailed negotiations with two of the potentially interested buyers, but should continue IPO preparations in parallel. An announcement or Press Release confirming the position would be made in the following week. The aim was to present a recommendation to the Board in December with respect to the preferred option.

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Minutes of a meeting of the Board of Directors held at 25 Gresham Street

on 14 December 2011 at 9:00 am

ACTION B2011/209 PROJECT VERDE Mr Lorenzo referred to:

• the respective bids received from two interested parties; • the current forecasts for the Verde business, in terms of

anticipated performance, as well as future funding needs; • proposed price adjustment mechanisms, which remained under

negotiation; • the views of the regulator, including with respect to the hybrid

security proposed by Ferrari (Co-op) – where the FSA had confirmed a helpful approach;

• timing, where conversations would need to take place with the Treasury and the European Commission, whichever bidder was chosen;

• the respective technical capabilities of the bidders, and the risks to delivery associated with each.

There had been full engagement with GEC members in relation to the proposed transaction, and the relative pros and cons of each bidder, including full consideration of

• price; • commercial terms; • customer and colleague attrition risks; • execution risk; • regulatory risk.

Reducing the mortgage component should in both cases produce an outcome that would be broadly capital neutral. In addition, the attractiveness of the IPO option had been assessed, alongside consideration of the strengths and weaknesses of the potential buyers. Lotus (NBNK) had, in general, proved more flexible and accommodating, in relation to both price and commercial terms. Mr Scicluna queried the anticipated level of gearing of Lotus, were Lotus to acquire the business. Mr Lorenzo commented that Lotus had publicly confirmed a desire to achieve a total capital ratio in the region of c 18%. Ferrari would aim for a core tier 1 capital ratio of at least 10%, and a total capital ratio of at least 13%. Execution risk in terms of funding was lower for Ferrari, although their proposed approach would entail credit risk for the Group. Mr Scicluna cautioned that it was critical that any decision by the Group to provide funding for a period to Verde should not compromise treatment of this divestment as a ‘sale’

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ACTION (and both Mr Lorenzo and Mr Tookey confirmed that the ‘sale’ treatment would not be jeopardised). Mr Lorenzo also commented that the offer from Ferrari had potential attractions for colleagues, including with respect to the availability of defined benefit pension arrangements for qualifying colleagues. Ferrari should be acceptable to customers (although it had not been possible to carry out detailed customer opinion surveys in this respect). Customer attrition would have an impact on price, through the price-adjustment arrangements proposed by both buyers. While it was difficult to assess which buyer would be more acceptable to customers, Ferrari was a well known, ethical, brand that had weathered the financial crisis well. In terms of other pros and cons, the offers were not equal in financial terms. The Lotus offer was potentially (albeit marginally) more valuable to the Group, but the costs of delivery to Lotus would be higher. The costs of IPO would be even higher. The hybrid instrument involved credit risk (to the Ferrari Group as a whole, not merely the Verde business) – but the objective was to create a marketable instrument that would have value and the potential for sale into the market. Ferrari was already a fully functioning bank; Lotus would need to build both customer and non-customer facing colleagues, control functions, and a credible Board. However, Ferrari recognised that, if it acquired the Verde business, it would need to upskill significantly. Both buyers would naturally insist upon MAC clauses, to be triggered by both micro (business specific) and macro factors. Sir Julian Horn-Smith queried the extent of the challenges that each bidder would face in assimilating this acquisition. Mr Fisher referred to the systems and other obstacles that each bidder would need to overcome, and their respective strengths. Although Lotus had very limited capabilities today, the organisation had energy and enthusiasm, and would quickly look to upskill and resource as required – to extricate the new organisation from the TSA, through migration, as quickly as possible. On the other hand, it would probably be easier to build a “business as usual relationship” with Ferrari. On balance, the lower execution risk was probably with Ferrari, although there would be ongoing credit risk to the Ferrari Group. Mr Lorenzo commented that, balancing all of these factors, and the respective positives and negatives, it was recommended by management, and the Board agreed, that:

• a period of exclusive negotiation should be offered to Ferrari; • preparations would continue with respect to a potential IPO.

A number of aspects, including the extent of the Group’s ‘hold’ of the proposed hybrid security were still subject to negotiation. It was the Board’s preference that the extent of the Group’s exposure to the hybrid security be kept to the minimum practicable. Mr Lorenzo would keep the Board advised of progress in this respect; including in relation to discussions with the Group’s Investment banks (who were being

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ACTION encouraged to take part of the hybrid security). A draft Announcement was considered and approved for immediate release to the market.

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on Thursday 23 February 2012 at 9.00 am

B2012/036 PROJECT VERDE: UPDATE

Mr Lorenzo commented on recent developments in relation to Project Verde, including with respect to:

• Co-op change of control issues; • the proposed hybrid instrument; • discussions with HMT and the European Commission.

Discussions continued with the Co-op in relation to a range of commercial issues. The aim was to finalise all commercial points by the end of March. In parallel, however, preparations with respect to the potential IPO option were being ramped up. These preparations were aligned with the needs for support with respect to Co-op that were now becoming clear, such that these IPO preparations were ‘no regrets’ moves. Discussions in relation to the capital structure of Project Verde and the returns that could be generated for the Group, and the trade off with respect to other elements of the proposed transaction, would continue. Mr Lorenzo would explore options that would keep the overall financial proposition intact. Mr Fisher commented further on the support required by Co-op, including with respect to IRB status. The required support had now gone well beyond the confines of what had originally been envisaged, and reflected in the purchase price. This was an emerging but critical commercial issue. If it could not be resolved, IPO was an increasingly attractive option, that needed to be, and would be kept alive. These and other issues could jeopardise the early stages of the timescale. The Board would be kept advised of developments.

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on Thursday 19 April 2012 at 9 am

B2012/059 BUSINESS UPDATES

(a) Project Verde Mr Lorenzo commented on recent developments in relation to Project Verde, and ongoing engagement with the Co-op, including with reference to:

• the potential regulatory treatment of Co-op; • the economics of the Verde business; • integration costs and risks.

Mr Fisher explained that, in relation to integration/migration, a “half carve out” approach was being explored as a potential alternative to a full carve out. If this was acceptable from regulatory and EU perspectives, this could be a less unattractive solution, both with respect to costs and capabilities. The viability of this approach – which could be relevant across a range of scenarios – would be evaluated over the next few weeks. NBNK continued to be interested in the acquisition, but the Group (currently) remained in a position of exclusivity with respect to Co-op. In any event, however, the economics and risks of the NBNK offer appeared to be inferior to the IPO route. Accordingly, it was recommended and agreed that:

• discussions with Co-op would continue unless/until Co-op withdrew, albeit not on an exclusive basis (once the current period of exclusivity expired);

• discussions would take place with NBNK, once the Co-op’s exclusivity had expired;

• the IPO route would become the primary focus if Co-op walked away, but the Group would engage with NBNK to see whether they could offer superior value and/or certainty, as compared to the IPO route.

Sir Julian Horn-Smith supported the proposed approach, emphasising the need for the Group to retain control over its own destiny, and the need to retain tension in the process, to the maximum extent possible. Seeking to proceed with Co-op, should that prove practicable, with IPO as the primary route against which other possibilities would be measured, was the best approach. Ms Frew agreed, but also emphasised the need to maintain clear control over the communications aspects of Project Verde. The Board would be kept advised of developments.

B2012/072 GOVERNMENT ENGAGEMENT: QUARTERLY REPORT ON EU STATE AID COMMITMENTS

Mr Baines provided an overview of progress made on delivery, monitoring and reporting against the overall EU State Aid commitments and highlighted

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the following key issues:

• Project Verde: the Group had approached the EU Commission to obtain a number of agreements consequent upon its negotiations with the Co-op. A letter of comfort from the Head of State Aid had been received; ….

Relationships with Mazars, HMT and the EC remained positive and had enabled good progress on change requests critical for the Verde divestment. The Board noted the update.

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Extract of Minutes of a meeting of the Board of Directors held at The Mound, Edinburgh

on Wednesday 16 May 2012 at 4pm


Mr Lorenzo provided an update with respect to recent developments concerning Project Verde. The Co-op remained the preferred buyer, and appeared keen to complete the transaction, subject to resolution of a number of issues, including various regulatory requirements; the IT position; and the performance of the Verde business. The aim was to reach a Sale and Purchase Agreement by the end of June with Co-op, although this would be a challenging timetable. Mr Fisher commented in further detail on the proposed approach to IT services, and the proposed Long Term Service Agreement (‘LTSA’). This issue had been received positively by the Group’s supervisors, at the FSA, but the position of the Co-op’s supervisors (and/or the EC) would be critical. The views of PwC also need to be updated, to ensure that the proposed transaction would remain a “sale” notwithstanding the proposed LTSA. Mr Roberts commented that the details of the LTSA, and the quality of governance, would be key. Mr Rougier commented on ongoing commercial discussions, and the potential removal of various assets from the transaction. These proposed perimeter changes would require EC approval in due course. These potential changes, and the approach to the LTSA, would also improve the assumed p and l profile of the business, with higher income and lower capital (with some short-term “subsidisation” of LTSA costs in the early years). Contact had been received from NBNK. There were ongoing discussions between the FSA and NBNK, but it was clear that NBNK was in the very earliest stages of securing regulatory approval. Further clarity had been requested with respect to NBNK’s proposed offer – which looked similar to their original (December 2011) offer. There had been no discussions as yet with NBNK with respect to the proposed revised approach to the IT architecture, however. Mr Lorenzo commented further on potential capital impacts of the proposed transaction with Co-op and as compared with potential IPO options, under various scenarios (including pre- and post- potential perimeter changes), taking into account build costs and funding options. The Chairman queried the approach to handling NBNK’s interest. The Group should not foreclose NBNK’s interest without giving them a proper opportunity to participate – if FSA support was forthcoming. Mr Rougier confirmed that dialogue with NBNK would continue, to get clarity about the detail of the NBNK offer; to improve that offer, if possible; and to provide further details of the proposed LTSA solution. The Chairman and Mr Roberts believed that it was important to give, and to be seen to give, NBNK appropriate opportunities to match or better the Co-op bid – taking care to build an appropriate audit trail

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should the Group proceed with Co-op rather than NBNK. Mr Horta-Osório agreed that engagement with NBNK would be considered carefully, to mitigate risks of subsequent NBNK complaints. Mr Fisher emphasised that, to create a truly level playing field, there would also need to be discussions about the “Corporate Core”. Ms Frew queried whether there should be a fresh appraisal of the respective competencies of Co-op and NBNK. Mr Horta-Osório emphasised the importance of maintaining the IPO route as the preferred credible alternative to a trade sale. Mr Scicluna commented that there was a case for the Board to reconsider the respective strengths and weaknesses of the two potential buyers, in changed circumstances. Although Co-op had many benefits in terms of brand, ease of working, market positioning, and other factors, some of the originally perceived benefits of the Co-op bid had fallen away. Mr Horta-Osório emphasised that the Co-op had synergy opportunities, and was likely to have lower costs of capital – which should enable them to pay more for Verde, as well as providing customer, brand, and other benefits. Mr Roberts commented that the work with the Co-op should continue; NBNK should be pressed to confirm the details requested by Mr Rougier; details should be given of the new IT and Corporate Core approaches; but no decision needed to be taken pending receipt of a firm offer by the Co-op and/or clarity of NBNK’s position, and no conversations were required in relation to the perimeter. Mr Ryan queried whether other candidates could be interested in these assets with a ‘turn-key’ operation on offer. Mr Rougier confirmed that this had been discussed with the Group’s Investment banks, but no additional bidders were believed to exist. The Chairman emphasised the need to get to the preferred solution, if at all possible, without being at risk of subsequent attack. There did not need to be detailed engagement with NBNK if they were not a credible potential buyer – but details of the IT solution and the Corporate Core should be shared.



Extract from the Minutes of a meeting of the Board of Directors held at 25 Gresham Street, London

on Wednesday 27 June 2012 at 2pm


By way of introduction, Mr Lorenzo congratulated Mr Rougier and the whole Verde deal team for having secured credible competing bids for this business. Mr Rougier outlined key developments since the previous update to the Board, including with respect to:

• NBNK, who had submitted a revised indicative bid, that was now based on the same perimeter and other factors (for example, the proposed Long Term Services Agreement – ‘LTSA’) as the Co-op discussions. A range of caveats had been added to NBNK’s bid, including with respect to:

- a demand for exclusivity, if their interest were to be pursued; - required ‘cost subsidies’, some of which were requested in

perpetuity; - a deadline for a response before the end of the month;

• ongoing discussions with the Co-op, and the comparison between the

Co-op’s offer, and the indicative bid from NBNK. Given the caveats and qualifications attached to the NBNK indicative bid (as well as the fact that this was still a ‘raw’ bid, that was more likely to be revised downwards, rather than upwards) the NBNK bid would need to be materially better than the Co-op bid to warrant further consideration (which it was not);

• both parties were ad idem, however, with respect to perimeter issues. Both required the exclusion of Intelligent Finance and certain C&G deposits. Both would require a ‘Corporate Core’ to be delivered, in addition to the LTSA.

Mr Fisher provided further details of the proposed LTSA solution; pricing; service standards; and potential liabilities that could arise. It was noted that if the Group continued its conversation with the Co-op, at some point the Co-op would “switch off” its proposed integration of Britannia – which would then create a significant dependency for the Co-op on the Group, and successful completion of the Verde transaction. Ms Frew queried whether the Group had been tough enough in its negotiations with either or both of NBNK and/or the Co-op. Both Mr Rougier and Mr Lorenzo confirmed that the deal agreed in principle with the Co-op was the best deal achievable with respect to its interest. Discussions with NBNK were clearly at a far less well developed state – but the indicative terms on offer from NBNK were more likely to deteriorate than improve, if exclusivity were granted

to NBNK. Mr Roberts highlighted the assumptions underlying the assessment of the respective offers in relation to the ‘earn-out’; it appeared that only relatively modest value needed to be attributed to the earn out for the Co-op bid to be materially better. Mr Rougier confirmed that the earn out projections were believed to be realistic and consistent with the Group’s expectations for the Verde business. Mr Roberts also commented that the NBNK interest involved significantly more execution risk, not least as NBNK did not have any funds, but was dependent upon the ability to raise cash from the market in due course. Mr Scicluna attached greater weight to the inclusion of a ‘cash’ element in the NBNK bid – but agreed on balance with other Directors that the Co-op bid should be preferred. In particular, a range of qualitative factors suggested that the Co-op’s interest was more attractive, including in relation to:

• the deal for colleagues and customers, where the Co-op interest was seen as the better route;

• the views of Government, customers and broader stakeholders in relation to the relative attractiveness of the Co-op’s business model;

• competition issues, and the prospects of further interest in the sector by competition regulators (not least given the desire to reduce the perimeter);

• execution risk. It was understood that, although discussions were not yet complete, the FSA did not have any fatal concerns about the Co-op’s interest in acquiring the Verde business. It was also understood (but would be re-checked) that the Group’s advisers continued to believe that the terms of the potential disposal to the Co-op would constitute a true ‘sale’, from accounting, competition, regulatory, and other perspectives. It was accordingly proposed and the Board agreed that an appropriate announcement would be issued shortly, confirming that good progress continued to be made in discussions with the Co-op, and an appropriate level of mutual understanding had been reached such that there would be a further period of exclusivity, at the end of which the intention was to agree and sign a Heads of Agreement. Prior to any announcement being released, conversations would take place with key individuals at NBNK, and other stakeholders. The intention remained to complete the sale by the deadline of November 2013. However, for at least the next phase of negotiations, preparations with respect to the possible IPO of this business would continue. The potential for NBNK to react badly to any rejection of its interest was understood, but was believed to be manageable. It was noted that if an IPO in 2013 were to be credible, steps would shortly (late Summer) need to be taken with respect to the recruitment of an appropriately qualified Board to govern the proposed stand-alone Verde legal entity.

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Extract of Minutes of a meeting of the Board of Directors held at 25 Gresham Street, London

on Thursday 27 September 2012

B2012/145 GROUP CHIEF EXECUTIVE’S REPORT

Mr Horta-Osorio reported on:

…... • Project Verde, in respect of which the EC had indicated that it would

authorise the transaction once the Sale & Purchase Agreement had been signed, subject to reaching agreement on the run off of the excluded businesses, early launch of PCAs and an extension of the competition ban. This approval applied to a sale to Co-Op only…..

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on Thursday 29 November 2012


….. (iv) Project Verde. Comments made by Lord Levene in respect of the bidding process were discussed. The comments were denied; actions were being taken by the Chairman to rebut these comments.

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on Thursday 24 January 2013

B2013/001 PERFORMANCE, FINANCIAL INFORMATION AND REGULATORY UPDATES

(i) Group Chief Executive Report In response to a question from David Roberts regarding progress on Project Verde, the Group Chief Executive confirmed that there was no change to the planned timetable. Peter Marks, CEO, Co-Op Group, had confirmed his intention to execute the agreement prior to his retirement. The Sales Agreement was expected to be signed in March 2013. An update would be provided at the April meeting. Given the commitment made to complete the transaction by November 2013, David Roberts asked at what point Plan B would be considered. The Group Chief Executive explained that if negotiations with the Co-op did not progress as planned, further options would be considered at the April 2013 board meeting.

AHO/JP

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on Thursday 28 February 2013

B2013/041 PROJECTS UPDATE

(i) Project Verde

Mark Fisher and Toby Rougier reported on positive progress towards establishing a standalone entity for Verde. Whilst Plan A (the sale to the Co-op) was the preferred option, challenges remained. Alternative bidders or an IPO could therefore not be ruled out. Notwithstanding the challenges, the transition remained on plan with the proposed rebranding and renaming on track for 1 August 2013. A discussion followed in the course of which the following were debated:

- recent press commentary about Co-Op’s readiness to progress with Verde, the implications for the Group and potential impacts on timelines of the EU mandate. It was noted that an IPO could not be achieved by November 2013 owing to the need to provide three years’ accounts for the relevant business which were expected to be available by early 2014. A decision on the preferred route would be required by May 2013;

- customer impacts and timings. It was noted that communications had been sent to customers but they were not yet aware to whom their accounts would be transferred;

- the relative benefits of each of the various options having regard to the need to create a challenger brand, the valuation of each and the implications on the value of the Government’s intention to dispose of part of its stake at 61p. In this regard it was noted that an IPO was potentially more attractive now than it had been earlier in the process;

- governance arrangements and management of conflicts of interest. An update was requested for the next meeting with a full report in May 2013.

AHO/MF

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on Thursday 18 April 2013


The Group Chief Executive presented his quarterly report, including: …. In relation to Verde, questions were posed as to the likelihood of completing the transaction with the Co-op. It was confirmed that this remained a less likely outcome than in the past. Progress was slow. The Board stressed the need to expedite the process. The Chairman confirmed that a final decision would be required no later than the June Board Offsite.

The appointment of BAML as joint corporate broker alongside UBS was noted.

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AHO

B2013/064 SIMPLIFICATION UPDATE

- Mark Fisher presented the quarterly Simplification update reporting on strong progress in the programme which was half way through its 3.5 year lifecycle…..

- … Delivering on Verde would free up considerable time but the challenges

in doing so should not be underestimated. The Board discussed the nature of the IT solution being delivered to Co-op which did not involve the full customer functionality available and therefore was not fully automated. It noted that this was in line with Co-op’s requirements and budget but expressed surprise.

The Board noted the update.

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Extract of Minutes of a meeting of the Board of Directors held at The Mound, Edinburgh

on Wednesday 15 May 2013


Mr Lorenzo presented an update on the next steps for Project Verde following the Co-Op’s withdrawal from the transaction. He explained the operational and structural work being undertaken to create a standalone banking operation with its own board and governance and the customer and product transition. He also outlined the nature and timing of discussions with the EU to provide alternative options. A proposal would be brought to the September Board meeting for debate and final decision.

AHO

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on Wednesday 31 July 2013 at 9.00am

B2013/126 PROJECT VERDE OPERATING UPDATE

Mr Fisher provided an update on Project Verde. Three dress rehearsals had been planned prior to the Brand and Separation Day on 9 September. The separation was operationally complex but manageable. In response to a question from the Chairman on a fall-back date, Mr Fisher advised that he was confident of meeting the target date of 9 September. The date could be delayed if the decision to do so was taken imminently but there would be a cost impact to the Lloyds Bank re-brand. In response to comments from Ms Weller, the Group Chief Executive agreed to provide a briefing to Ms Weller and Ms Fairbairn on Project Verde and the rationale behind choosing an IPO as the preferred divestment route.

AHO

strictly private and confidential lloyds banking … · held at 25 gresham street, london, ec2v 7hn...

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