A HIGH street bank with millions of UK customers is “to be sold” to a major rival in a new landmark deal.
The Co-operative Bank is poised to take a significant step towards reclaiming its mutual status as it prepares to announce its acquisition by the Coventry Building Society.
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Sources familiar with the matter told Sky News that the two businesses are set to reveal their agreement on the transaction terms as early as Thursday morning.
It’s understood that the Coventry Building Society will pay £780 million in cash for the acquisition.
Negotiations between the Co-operative Bank and Coventry have been ongoing for over three months, with several details yet to be finalized.
If successful, the acquisition would effectively restore the Co-operative Bank’s mutual status and create a financial powerhouse boasting assets nearing £90 billion.
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Both lenders have been contacted for comment.
It’s important to note that if the acquisition goes ahead, customers will not experience any immediate change.
Deposits will not change, and savings up to £85,000 will remain protected by the Financial Services Compensation Scheme (FSCS).
Talks of the potential merger have been ongoing since December 2023.
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Co-op Bank told investors, at the time, that it had begun “exclusive discussions” with the building society in order to “evaluate the merits of a combination” of the firms.
It follows speculation last year over a string of potential bidders for the lender, which has turned around its financial performance and recovered its profits.
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Potential bidders for the group were thought to, at one stage, include specialist lenders Shawbrook and Aldermore.
With its origins dating back to 1872, Co-op Bank currently provides banking services to about 2.6 million retail customers and more than 93,000 small and medium-sized enterprises.
Meanwhile, Coventry manages nearly £50 billion worth of mortgages and more than £45 billion in savings balances.
Last month, The Co-operative Bank announced plans to cut around one in 10 of its workforce, shedding approximately 400 jobs, in a bid to cut costs.
The bank is no longer part of the wider Co-operative Group after parting ways in 2017 when it fell into deep financial difficulty.
It is now owned by a group of private equity investors, including US-based JC Flowers and Bain Capital Credit, who bought a stake in 2021.
A tie-up with Coventry Building Society could return it to a member ownership structure.
The once-flailing bank became profitable two years ago and more than quadrupled profits in 2022, under the leadership of chief executive Nick Slape who steered its turnaround.
Co-op Bank agreed to buy Sainsbury’s Bank’s mortgage portfolio in August 2023 for £464 million, taking on its approximately 3,500 customers.
YEARS OF TROUBLE
Hedge funds, including GoldenTree Asset Management and BlueMountain Capital, took control of Co-op Bank from its previous owner, the Co-operative Group, through a restructuring process in back in 2017.
The bank last explored a sale to Cerberus Capital Management in 2020, but talks ultimately broke down, according to media reports at that time.
BlueMountain subsequently sold a minority stake in the group to private equity houses JC Flowers & Co and Bain Capital in 2021.
Later that year, Co-op Bank made an offer for domestic rival TSB Group, which Spanish parent Banco Sabadell rejected
Bankers have long expected consolidation among the UK’s mid-sized lenders to help them compete more effectively with larger players like NatWest and Barclays, but few deals have been made.
RECENT ACQUISITIONS
Last month, Virgin Money agreed to a takeover by Nationwide Building Society in a £2.9billion deal.
Nationwide said the merger would enable the company to provide members with a wider range of products and services.
The takeover has brought together Britain’s fifth and sixth-largest retail lenders, creating a combined group with nearly 700 branches.
The two brands will initially operate under their separate names and be re-branded within six years.
In February we saw a similar deal made between Barclays and Tesco Bank.
Tesco Bank, which has over five million customers, was sold to Barclays in an agreed-upon deal that included acquiring almost 3,000 staff.
It comes after Sainsbury’s announced it will wind down its banking division, Sainsbury’s Bank, as part of plans to focus on retail.
Last summer, Sainsbury’s Bank offloaded its £479million mortgage book to Co-op Bank.
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Elsewhere, struggling Metro Bank announced it would axe 800 jobs and review its opening hours in a new cost-cutting drive.
The high street bank has also cut its seven-day branch opening hours as it attempts to claw back costs.
