Lloyds to pick Frankfurt for EU subsidiary post Brexit

Bloomberg

Lloyds Banking Group Plc, Britain’s largest mortgage lender, is set to pick Frankfurt as its base to maintain access to the European Union’s single market following Brexit, according to a person with knowledge of the matter.
The UK bank will choose to convert its German branch into a subsidiary and plans to apply for an extension to its banking license, said the person, who asked not to be identified because the details aren’t public. Lloyds may move a small number of jobs to the country and has yet to apply for the changes, the person added. A final decision hasn’t been made.
Lloyds, which focuses on its home market, has relatively small operations in the EU and is the only major London-based lender without a banking subsidiary elsewhere in the trading bloc. U.K. Prime Minister Theresa May confirmed on Tuesday that Britain will exit the single market, which could push some banks to relocate operations in the EU.
Lloyds, which has almost all of its assets in Britain, has been examining how to retain its EU clients and maintain access to the European payments system, according to a separate person with knowledge of the matter. Other considerations include the need for regulatory approval, staffing and capital requirements, the person said. The bank has about 9 billion pounds ($11 billion) in customer deposits in Germany through an online bank and about 6 billion pounds of residential mortgages in Holland.
Lloyds has authority from the U.K.’s Financial Conduct Authority to provide services in 31 different European Economic Area states, analysts at Citigroup Inc. led by Andrew Coombs wrote in a note to clients this month. Following the vote to leave the EU, the U.K. “will now have to renegotiate these rights, which has huge implications for the global investment banks and for the U.K. banks themselves,” he said.
HSBC Holdings Plc Chief Executive Officer Stuart Gulliver said on Tuesday that trading operations generating about 20 percent of revenue for the lender’s investment bank in London may move to Paris. The bank will “proceed quite slowly” to move about 1,000 staff to the French capital, where it has a full banking subsidiary, Gulliver said in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland.