The sale will comprise a mixture of shares and cash and consists mainly of Lloyds retail mortgage and deposits, which Lloyds said included a “large portion of non-resident clients”.
The transaction is expected to lead to a loss for Lloyds of approximately £250m in its accounts.
John Westwood, managing director of Gibraltar based advisory company Blacktower Financial, said the deal is another blow for average clients looking for reasonable banking services.
“It is increasingly difficult for advisers trying to service the specific expatriate needs of their clients and the loss of Lloyds International in Spain simply signals continuing problems in trying to do so,” said Westwood.
“There are a large number of banks in Gibraltar but most of them tend to want to service the high net worth end of the market, so there is a shortage of those serving your average clients.
“This shortage means there is decreasing competition and as a consequence of the banking environment more widely, clients can expect to pay more for their banking.”
Under the sale agreement, Lloyds will receive shares equivalent to approximately 1.8% of the total issued share capital of Banco Sabadell as part of the consideration for the sale – shares it has undertaken to retain for at least two years as part of the agreement.
The total consideration will be a mix of cash and shares, with Banco Sabadell delivering 53.7 million ordinary shares out of its treasury worth around €84m (£72m) at completion. In addition, up to £20m may be payable in cash in the next five years, dependent on mortgage book margins.
As of 31 March 2013 the total assets of the businesses being sold were approximately £1.5bn – comprised almost entirely of customer lending, and customer deposits were approximately £670m.
Lloyds said its Spanish business reported a loss of approximately £43m in 2012, which included an increase in the impairment provision as a percentage of impaired loans to approximately 90%.
The company said the sale is in line with its strategy of “rationalising” its international presence. This strategy saw it close its Lloyds TSB International office in Hong Kong as well as operations in Japan, Dubai and Uruguay.
