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Lloyds reviews C&G decision
By Rebecca Atkinson
Cheltenham & Gloucester may live to see another day on the high street after Lloyds Banking Group (LLOY) said it was rethinking plans to close the 164-strong branch network.Back in June, the banking group - which was recently named the UK's largest mortgage lender - revealed plans to close the branch network, making 1,660 staff redundant. However, it said the brand would be retained with a focus on online savings accounts and sales of mortgages through brokers.In a twist to the tale, Lloyds has now announced that it may in fact double back on this decision - but whether this means Cheltenham & Gloucester branches will remain open or be sold to another bank remains to be seen.In a statement, the bank says: "Lloyds Banking Group is reviewing the planned closure of the Cheltenham & Gloucester branch network."It adds that affected Cheltenham & Gloucester staff have been informed of the potential changes, and that customers should continue to use their branches as usual.David Buik, economist at BGC Partners, doesn't believe there is any reason for Lloyds to keep its Cheltenham & Gloucester branch network open."Frankly one brand is enough - Lloyds increased its market share for mortgages from 28.2% to 28.6% by the end of 2008," he adds. "Sadly, Cheltenham & Gloucester is superfluous to requirement."One alternative is to sell Cheltenham & Gloucester altogether. Buik says: "Selling Cheltenham & Gloucester would put some much needed money in the bank. Closing it would cut costs. Management is decent and this mortgage lender would fit very snugly into a retail bank's portfolio."Others suggest that the volte-face indicates that Lloyds could be considering a sale to appease competition concerns of the European regulators. Lloyds is currently waiting to be given the go-ahead to use the state-backed asset protection scheme for £260 billion of its toxic assets.The European regulator has already suggested that Lloyds would need to reduce its presence in the mortgage and deposits market in order o get approval.Names in the frame to purchase Cheltenham & Gloucester include Barclays (BARC), which only has a 6.6% share of the mortgage market through Woolwich, National Australia Bank and even HSBC (HSBA). However, with the credit crunch still causing financial pain for most banks, it may be tough to clinch a sale.Analysts also point out that finding a buyer could prove a difficult task as low interest rates means savings are loss making while lenders would rather write new mortgages than acquire a book which may come with potential problems. Shares in Lloyds were continuing their good form from yesterday, up over 3% to 102.1 today.
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