Co-op deal to buy Lloyds branches 'may not happen'

The chief executive of the Co-operative Group says the deal to buy 632 branches from Lloyds Banking Group "may not go ahead".

Co-op is in exclusive talks to buy the branches, which Lloyds has to sell for regulatory reasons.

"There are significant economic and regulatory issues that we have to address and that's what we're working towards," Peter Marks told BBC News.

He promised an update on the situation in the coming weeks.

"Within the next few weeks we will complete our analysis and then we will tell the world whether we can do it," he said.

"This is a steep change for us and it's a very complex transaction and one that we're going to take our time examining."

Mr Marks was speaking after Co-op released its financial results for 2011.

Profit before tax and member payments came in at £373m, down 5.8% compared with 2010.

The mutual cut its dividend per point to 1.75p from 2p in 2010. Points are earned by members when they spend money in any of the Co-operative's businesses.

Like-for-like sales in its 2,801 grocery stores fell 2.1% in 2011, and the group predicted that 2012 would be just as challenging.

Co-op is running pilots providing banking and electrical services in food stores.

It is also launching the provision of legal services in its bank branches.