The Co-operative Group has held talks with the chief executive of NBNK Investments PLC (NBNK.LN), its rival to buy the retail branch network being sold by Lloyds Banking Group PLC (LYG), the Sunday Telegraph reports without citing sources.

The Co-op has held discussions with Garry Hoffman about him joining the group over the last six weeks in its bid to find suitable executive talent to run its enlarged group, but the talks have now broken down, the paper says.

The Co-op was chosen as preferred bidder for the business on Dec. 14 over NBNK but has come under pressure from the Financial Services Authority over its governance. The Co-op is owned by its members and as such has an unusual mutual structure--in particular, the group's boards are made up of members rather than company executives and non-executive directors.

The Co-op doesn't have chief executive for its banking division which is overseeing the planned acquisition, the paper adds.

Lloyds has said it will update the market later this month on the talks. The bank meanwhile continues to explore a flotation of the business as a backup in case a sale can't be agreed.

The Co-op said it will provide an update when it reports its annual results March 28.

Representatives for the Co-op and NBNK werent immediateley available to comment.

Newspaper Web site: http://www.timesonline.co.uk

-London Bureau, Dow Jones Newswires; +44 (0)20 7842 9320

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