The Co-operative Group has been confirmed as the front runner to land the 632 branches that Lloyds Banking Group must sell in order to comply with European Commission rules.
The part-nationalised banking giant said more detailed exclusive discussions will now be held, with the aim of agreeing a deal by the end of the first quarter 2012.
The announcement appears to suggest no further talks will take place with NBNK, the new bank venture which has also wanted to secure the purchase of the branches.
By taking over the branches, the Co-op's presence on the high street would improve dramatically, and could also make it Britain 's seventh largest bank.
Lloyds, which is 41%-owned by the state, has been ordered to sell off the branches in order to meet European rules with regards to competition.
"We are pleased to be reporting progress with the Verde divestment which continues to move forward in line with our expectations," said Tim Tookey, Lloyds' interim group chief executive and group finance director.
"I am confident that we will complete the transaction by the end of November 2013, in line with the EC mandated timescale."
At the same time, Lloyds has confirmed its chief executive will return to his desk from sick leave on 9 January.
The bank announced on 2 November that António Horta-Osório had taken a leave of absence on medical advice.
However, independent medical advice has concluded that Mr Horta-Osório has made a full recovery and is capable of returning to 'effectively lead the group'.
A statement added that the board has agreed to an initiative from Mr Horta-Osório to restructure and reduce his direct reporting lines in order to strengthen the accountabilities of his senior management team.
"This is designed to provide the most appropriate environment to maximise the senior management's contribution as the group enters the next stage of its transformation," the statement added.
Sir Win Bischoff, chairman of the group, said the board was pleased that Mr Horta-Osório had made a full recovery.
"We are looking forward to his return after the New Year to continue to lead the group and build on the strong progress he has already made in transforming the business and delivering the strategic plan," he added.
"The board would like to thank Tim Tookey for the considerable support and dedication he has shown whilst acting as interim group chief executive in addition to his role as group finance director."
Shares in Lloyds Banking Group have risen on the announcements.
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