The Co-operative Group has agreed the “transformational” purchase of more than 600 high street branches from Lloyds Banking Group for a bargain-basement price.

A deal has been reached in principle for the 632 branches, which will cost The Co-op just £350m up front, with a further £400m due over the next 15 years, depending on performance.

Lloyds had initially valued the branches at more than £1.5bn.

The Co-op’s chief executive, Peter Marks, said the deal would “deliver the biggest shake-up in high street banking in a generation” and “propel [The Co-op] into the premier league of UK banking”.

He said the deal would “help restore trust in a sector whose image has been badly tarnished” and also claimed it gave taxpayers a “fair price” – despite paying less than half the original valuation.

The reduced price tag reflects the regulatory hurdles yet to be cleared, as well as potential difficulties integrating the business.

“The acquisition of the Verde business [as the branches are collectively dubbed] would significantly advance our growth strategy, creating a combined bank approaching 7% market share of UK personal current account customers,” Marks said.

“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.”

“Consequently, we believe this would be a great deal for customers, for the public, for UK banking generally and for The Co-op, in particular.”