For instance, Lloyds lost £6.3bn in the same year as it was hit by £24bn of impairments as a result of its merger with HBOS. Yet at Co-op Bank the total annual impairment charge was just £112m, which the mutual said was down to “the cautious approach taken by both heritage businesses”.
A year later, impairments had fallen further to less than £100m and such was the Co-op’s confidence in its financial strength that in 2011 it launched a bid for the 632-branch Project Verde business being sold by Lloyds.
In December 2011, Lloyds confirmed the Co-op was its preferred bidder.
Yet, in its moment of triumph were laid the seeds of its disaster. As Lloyds staff and regulators began to pore over the Co-op Bank, they became troubled by what they found.
“It became clear very early on that they didn’t have the experience or the skills to manage an integration of this size. From what we could see, the Britannia integration had barely been begun and they appeared to have no concept of what it would take to fix the business,” said one senior banker.
Of particular concern was the apparent capital hole in the business. Lloyds had planned to sell the Project Verde unit with assets of about £60bn. But this had to be more than halved.
Essentially, small time bankers didn\’t understand banking.
That\’s a great boost for the idea of having lots of small mutual banks, innit?