The boss of the Co-op said he welcomed the new customers and described the changing face of high street banking as being "almost revolutionary".
Co-op Group CEO Peter Marks, speaking to Sky's Eamonn Holmes, said: "Why are we different? Because we are owned by our customers and we are known for our trust and ethics.
"We're not just about short-term profit and share price, we are about the long-term and sustainability, and that is why we are different to the other high street banks.
"This is almost revolutionary for the banking industry, and goodness me, the banking industry really needs this at the moment."
The deal concludes a protracted sale process aimed at streamlining the business at the behest of regulators and boosting competition in high street banking.
Lloyds, which is 40% owned by the British taxpayer, said the Co-op would pay an initial £350m for the branches, along with £400m in additional payments.
The deal is still awaiting final approval from the Financial Services Authority and the Treasury. In early Thursday trading, the share price of Lloyds was 0.8% down, at 29.7p.
The portfolio of branches was earlier expected to fetch up to £1.5bn for Lloyds but the bank said that its loss on disposal would be broadly offset by lower capital requirements.
The deal will bring 4.8 million new customers to Co-op's burgeoning banking brand, including 3.1 million current account holders.
Combined with its existing branch network, the Co-op will end up with around 1,000 branches across the UK.
Lloyds CEO Antonio Horta-Osorio said: "Today’s agreement is an important step in meeting our obligations under the mandated sale of our branches.
"We believe the Co-operative will be a good owner for our business, customers and colleagues, and the combined banking business will be a significant competitor on the high street with nearly 10% of today’s UK branch network."
It will give the Co-op a balance sheet of around £24bn with fully 'matched' assets and liabilities, and is seen as the biggest new entry shake-up of high street banking for decades.
Meanwhile, in a further change to the face of Britain's retail banking, Marks & Spencer (Dusseldorf: MA6.DU - news) has opened its first bank branch for customers able to use it as late as 11pm as well as on Sundays.
The branch at its flagship Marble Arch store in central London is the first of 50 planned to open over the next two years, with opening hours mirroring those of the stores they are sited in – meaning seven days a week banking.