UK-listed Lloyds Banking Group has agreed to sell its Spanish retail operations, including private banking services, to Banco Sabadell.

Lloyds Banking Group has agreed to sell its Spanish retail and private banking operations, including Lloyds Bank International SAU and Lloyds Investment España, to Banco Sabadell, subject to regulatory approval.

The sale comprises the bank’s retail and private banking business and the local investment management business in Spain. The business being sold consists mainly of retail mortgages and deposits, with a large portion of non-resident clients. However, the Spanish corporate banking operations serving business clients are not included in this transaction and will continue to operate as usual, the firm said.

The UK banking group, which is partly owned by the taxpayer following a bailout amid the 2008 financial crisis, has been looking to shed certain assets and boost profitability. 

On completion of the sale, Banco Sabadell will deliver 53.7 million ordinary shares out of its treasury holding with such shares being valued at €84 million (around $110 million) by reference to the volume weighted average share price on 26 April 2013. An additional cost of up to €20 million may be payable in cash within the next five years dependent on mortgage book margins.

As of 31 March 2013, the total assets of the sale were approximately £1.517 billion (around $2.355 billion), comprised largely of customer lending. Customer deposits were approximately £670 million. Lloyds Banking Group Spanish retail operations reported a loss of around £43 million in 2012, which included an increase in the impairment provision as a percentage of impaired loans to approximately 90 per cent. The sale of the business is currently expected to lead to a loss on disposal of approximately £250 million.

The current senior management employed by Lloyds Bank International SAU and all of the staff of the Spanish retail operations will move across with the subsidiaries on sale.  Any cash proceeds of the sale will be used for general corporate purposes, the firm said.

Meanwhile, in conjunction with the sale, Lloyds Banking Group is also developing a collaboration agreement with Banco Sabadell to explore potential business opportunities in areas including retail, commercial, private banking, as well as asset finance and asset management.

According to a report by Reuters, earlier this month Lloyds Banking Group hired Deutsche Bank to prepare it for the potential sale of its Scottish Widows Insurance and Pensions business.