What has spurred rumours is Lloyds hiring several hundred more staff for the business - not the sign of a business about to be down-sized.
Plan B?A flotation would likely be cheaper and quicker. There has been considerable City concern over just how the Co-op would attempt to integrate the 632 Lloyds branches, code-named "Project Verde". However Lloyds is still maintaining the line that a sale to the Co-op is still on the cards, but with a fall-back option.
"It remains our preference to sell the Verde business to The Co-operative Group," said Lloyds Group in a statement yesterday. "In addition the Group is continuing to prepare for a divestment through an Initial Public Offering (IPO). We continue to progress discussions with the Co-operative Group."
Given that this is a substantial business and a highly complex transaction, Lloyds added, "the Group now anticipates providing a further update in Q2 2012."
Board concernMeanwhile the FSA is also understood to be concerned about the Co-op Board, according to a report in the Sunday Telegraph. Unusually, the egalitarian Co-op has a plasterer and a Methodist Minister on its top table. Its suggested that the FSA may be unhappy with this composition (surely a moot point given the ethics of the financial industry in the last 10 years).
Be aware that the sell-off of Lloyds branches is just a fraction - roughly 22% - of the overall 2,875 branches. Lloyds told AOL Money that existing Lloyds customers can check at their local branch if it is likely to be divested into a new sale. Even if it is, it's unlikely - branding apart - there will be many changes, with the same staff retained it says.
Meanwhile the British taxpayer needs Lloyds share price to rise sharply. The Government paid 74p per share for Lloyds; currently its shares sell for 35p.