Manchester-based giant the Co-operative Group are expanding their banking interest by purchasing 632 Lloyds TSB and Cheltenham and Glouscester branches.
The Rochdale-founded business are set to pay £350million as an initial fee – it could increase to £400million depending on future performance.
The colossal deal will give customers more choice and make banks more competitive. The Co-op have 4.8million members and the deal represents a 6% share of the UK market as their branches reached almost 1,000.
Peter Marks, Group Chief Executive of The Co-operative Group, said: “This deal would deliver the biggest shake-up in high street banking in a generation.
“Consequently, we believe this would be a great deal for customers, for the public, for UK banking generally and for The Co-operative Group, in particular.”
He added: “It would be a great deal for the taxpayer because as well as receiving a fair price up front, the deal would also mean they would share in the profits of the enlarged bank for years to come.
“So far as UK banking generally is concerned, this would be a great deal because it would help restore trust in a sector whose image has been badly tarnished over recent years.”
Lloyds’ government bailout following the banking collapse in 2008 means it is still 40% owned by the taxpayer.
The deal is yet to be approved by the Financial Services Authority but it is expected to be complete by November next year.
The Chancellor, George Osborne, said: "This is another step towards creating a new banking system for Britain that gives real choice to customers and supports the economy," he said.
"The sale of hundreds of Lloyds branches to the Co-operative creates a new challenger bank and promotes mutuals.
“This follows the sale of Northern Rock to Virgin Money in January and represents another important step towards a more competitive banking sector."
The Co-operative Group have 20million customers and a staff-force of 100,000 – the deal is expected to propel them into the ‘premier league’ of banking.
Mr Marks added: “The acquisition of the Verde business would significantly advance our growth strategy, creating a combined bank approaching 7% market share of UK personal current account customers.
“That would allow us to really challenge the status quo on the high street.
“Despite the crisis in the financial sector, our bank has continued to go from strength to strength, coming through the financial crisis in great shape and maintaining our ethical and socially responsible credentials.
“Whilst we are not at the end of the road yet, we are pleased to have reached this important milestone and look forward to continuing to work with Lloyds Banking Group to reach a final agreement.”
Last month, the Group revealed surprising financial figures for the last year as they outperformed the UK market and grew by 1.5% - a £35.6billion total turnover.
The community-focused sector has grown by a huge 20% since the financial crisis first hit the UK in 2008, while the national economy has slumped by 1.7% in the same time period.
There are currently 4,784 Co-operatives in England, with a large portion of that figure in Manchester and the North West.