4.8 million customers' accounts will be transferred under the terms.
Lloyds Banking Group (LSE: LLOY) has agreed heads of terms with the Co-operative Group for the sale of 632 Lloyds TSB and Cheltenham and Gloucester branches.
The mandated divestment, known as Verde, was enforced by European regulators following Lloyds' acquisition of HBOS in 2008, amid the depths of the financial crisis. The price is thought to be significantly lower than the £1.5bn bid by NBNK last year, with the Co-operative paying £350m upfront, with an additional £400m based on performances.
Lloyds will now seek formal approval for the terms of the divestment with the relevant governmental and regulatory bodies.
Combined with the Co-operative's existing network, the divestment -- estimated to be completed by the end of November 2013 -- will lead to an approximate 10% of the UK's market share, with around 1,000 branches across the country. It will also gain from Lloyds an extra 4.8m customers -- including 3.1m personal current account customers -- giving the combined business almost 7% of the personal current account market.
The sale also includes a balance sheet of £24 billion with fully 'matched' assets and liabilities, as well as the TSB and Cheltenham & Gloucester brands.
Lloyds group chief executive António Horta-Osório commented: "We believe the Co-operative will be a good owner for our business, customers and colleagues, and the combined banking business will be a significant competitor on the high street with nearly 10 per cent of today's UK branch network. In agreeing to move ahead with the Co-operative we provide greater certainty for our customers and for our shareholders."
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