Q&A: Lloyds and RBS sell-off

Q&A: Lloyds and RBS sell-off

Banks which received money from the government to help them survive the credit crunch have agreed to sell off some of their assets to boost competition in the banking market.

Under plans announced today, Lloyds TSB, which is 43.5% owned by the taxpayer, will reduce its mortgage business by 19% and its current account business by 4.6%. To do this it will sell the former TSB business, Lloyds TSB Scotland, the business run under the Cheltenham & Gloucester brand, and its online business Intelligent Finance. At least 600 branches are set to be sold, as well as the mortgage, current account and savings books associated with them.

Royal Bank of Scotland, which has 70% state backing, is selling the branch-based RBS business in England and Wales and its NatWest branches in Scotland – a total of 318 outlets and 1.7 million customer accounts. It has also put up the for sale signs on its insurance brands Churchill, Direct Line, Privilege and Green Flag.

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What if I have an account with RBS or Lloyds?

"It is very much business as usual," according to a spokesman for Lloyds TSB. He says it could take up to four years for the various elements of the business to be sold, so customers will continue to have the same relationship with the bank for some time to come.

The branches will stay open while a buyer is found, and you will still be able to use telephone and internet banking systems. It is the same story at RBS, where a spokesman says the detail has yet to be worked out, but when it is it will be communicated to customers.

On the plus side, under today's deal with the Treasury to secure more state funding the banks have apparently made a commitment to make sure charging for current accounts and overdrafts is transparent and fair and that customers are not overcharged. That said, Halifax has just launched a £1 a day overdraft fee for current account customers.

What if I have a C&G mortgage?

If you bought it through a branch, unless you redeem it before the sale it will eventually be sold, likewise any mortgage agreed through Lloyds TSB Scotland or any outstanding TSB home loan. If you bought it through a mortgage broker there will be no change.

C&G is currently selling five-year fixed-rate mortgages – if you take out one of these through a branch you can guarantee you will one day end up being a customer of another bank.

What if I have my insurance through Churchill?

Again it is business as usual in the short term; RBS says it will sell the business "between now and the end of 2013". If you have a policy you should certainly continue to pay the premiums and, as always, shop around when it is time to renew it.

I have bank shares – what does it mean for me?

David Kuo from Fool.co.uk says the sell-off is bad news for bank shareholders. He claims recent consolidation is proof that the UK already has too many banks. "To create artificial competition will be damaging to existing banks at a time when they need to rebuild their balance sheets," he says. "Bank investors should tread carefully and look to institutions that are not overly reliant on the UK market. These include Standard Chartered, HSBC and Barclays."