THE Co-operative Group has hailed its deal to buy 632 Lloyds Banking Group branches as “the biggest shake-up in high street banking for a generation”.

The group, which will pay up to £750m for the branches, said the move would create a “new challenger” in British banking.

The long-awaited agreement includes transferring the Ramsden Street branch of Cheltenham & Gloucester in Huddersfield to the Co-operative Bank.

The deal will see the Co-op triple the size of its banking business to almost 1,000 branches, add about 4.8m customers and increase its share of UK branches to about 10%.

The Co-op will pay £350m up-front and a potential further £400m by 2027. However, the price tag is far short of the £1.5bn first mooted.

Lloyds, which is 40% state-owned, said it would suffer a loss on the sale, but said this would be offset by a fall in the amount of capital it has to hold on its balance sheet.

The Treasury welcomed the announcement, which forms part of a raft of measures to reform the banking system and improve competition.