LONDON, July 4 (Reuters) - Banking start-up NBNK said on Thursday its executives had personally handed a document to the chairman of Lloyds Banking Group early last year spelling out the risks of selling hundreds of branches to a rival bidder.
NBNK had made a bid for the 632 branches being sold by part-nationalised Lloyds, which chose to sell them to Co-op Bank. But the deal collapsed in April when it emerged Co-op needed to plug a 1.5 billion pound ($2.26 billion) capital hole.
The decision by Lloyds to sell the branches to Co-op prompted allegations that politicians - keen to back customer-owned financial services businesses, such as Co-op, as an alternative to mainstream banks - had encouraged the choice.
Details of the warning given to Lloyds' chairman Win Bischoff were included in supplementary evidence submitted by NBNK to a parliamentary committee which has been investigating the failed deal.
Peter Levene, who led NBNK's bid for the branches, said in the submission that he and NBNK CEO Gary Hoffman handed a document detailing risks with the Co-op bid to Bischoff at a meeting on Jan. 27, 2012.
The document handed to Bischoff said there was a "high risk" the Co-op deal would fall through, citing its stretched capital position and execution risk.
A Lloyds spokesman said: "We have no record or recollection of receiving this document." He said the bank had given that message to the Treasury Committee.
The Lloyds spokesman said its choice of Co-op Bank "was made on a purely commercial basis".
Lloyds executives last month told the committee they did not realise there was a problem with Co-op's capital strength until December 2012 when a revised plan for the integration of the two businesses was submitted.
Levene was also critical of Lloyds executives' comments about the bidding process to lawmakers and said that showed they did not understand the bid submitted by NBNK.
Levene said evidence given by Lloyds CEO Antonio Horta-Osorio to the Treasury Committee "neglected to make clear a number of material points" and "failed to represent the quantum and scope of NBNK's final bid."
Both offers had complex structures. Co-op's bid was worth about 700 million pounds and NBNK's offer may have been just 630 million, Lloyds estimated.