The planned sale of more than 600 UK bank branches by Lloyds Banking Group to the Co-Operative Group has fallen through, people familiar with the matter said.
Confirmation of the collapse of the deal is expected to come on Wednesday morning, the sources said.
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The deal has long been in danger, and is likely to leave Lloyds' most likely option as a flotation of the branches some time in 2014. European regulators have demanded Lloyds sell the branches as a cost of taking a state bailout.
(Reporting by Matt Scuffham and Steve Slater; Editing by Sinead Cruise)