Coventry Building Society (CBC) could potentially merge with Co-operative Bank in a £780 million deal after four months of being in talks.
It comes as the building society agreed to the bank’s commercial terms yesterday (18 April).
The move follows a string of providers buying banks – Nationwide is the latest Building Society to strike a deal to buy Virgin Money in a 2.9 billion deal, and Barclays is acquiring Tesco Bank in a £600 million deal.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
If the merger goes ahead, the building society will become the UK’s seventh-largest provider, with a customer base of nearly five million and hold assets worth £89 billion.
Find out when the takeover will take place and what it will mean for customers.
Why is Co-operative Bank selling up?
The bank has been on a tough ride, with its near collapse in 2013 after being bought out by Britannia Building Society in 2009, and finding a £1.5 billion gap in its accounts. And the bank only just recorded profits for the first time in a decade, two years ago.
But its profits slumped again as the bank’s latest report revealed £71.4 million in pre-tax profits for 2023 – down from £132.6 million in 2022.
The Co-operative Bank has also had its fair share of acquisition talks, but they have all reportedly fallen through.
There were rumours of Cerberus Capital Management looking into the sale of Co-operative Bank in 2020, but nothing happened. Plus in 2021, the Bank made an offer to banking ginat TSB, but was reportedly rejected.
Sainsbury’s Bank was also in discussion with the Bank over a £650 million mortgage deal, but this fell through as a price couldn’t be agreed.
When will the deal happen?
As it stands, the takeover between CBS and Co-operative Bank is not set in stone as the building society tells MoneyWeek “there’s more work to do.” And, CBS has said there is no guarantee that this deal will happen.
Both parties agreed on their key terms on 18 April, but they are still awaiting approval from financial regulators and working on contractual terms. In the meantime, both the bank and building society will keep serving their customers under their separate brands, until a deal is finalised.
If and when the merger happens, CBS said it will take several years for it to fully integrate Co-operative Bank’s three million customers.
Simon Kent, global head of financial services at Kearney said: “Coventry Building Society’s recent offer to acquire the Co-op Bank is positive news for both parties, should the deal conclude. It brings further scale to both parties and presents an opportunity to extend their offers to more customers.”
What will it mean for customers?
CBS has confirmed there will be no immediate changes for customers, as the deal is not yet finalised.
Currently, the Co-operative Bank offers financial products to its customers including credit cards, savings accounts, mortgages, loans and insurance products. The building society said it cannot confirm which financial products will shift over in the merger as of yet.
Although there are reports that the deal will include brands sitting under Co-operative Bank, the Bank could not confirm this either. The brands include Britannia, Mortgage Agency Services Number Five (MAS Five), Sainsbury's Bank mortgages, Smile, and The Co-op Bank for Intermediaries.
What is the difference between a building society and a bank?
Building societies are owned by their customers – those who hold financial products with the provider such as bank accounts and savings products.
Bank’s tend to be bigger providers, but building societies have shown to offer better rates when it comes to the best savings accounts.
Kent adds: “It is particularly interesting to see the resurgence of the building society sector as a consolidator and a model which continues to resonate well with customers.”
-
Pension Scheme Bill: what’s changing and what it means for youThe government’s latest reforms to pensions are designed to make saving for retirement easier and better value for money – but will they leave you better off?
-
How much pension you need to quit at 50 and enjoy a comfortable retirementThe cost of living well in retirement has jumped again, but what if you want to retire more than a decade early on a good income? It’s not cheap, but we have crunched the numbers on how to do it.
