What you need to know

Coventry Building Society has agreed to buy The Co-operative Bank for a cash consideration of £780m. If you’re a saver or an existing borrower, here’s what you need to know about this purchase.

The company and the bank signed a share purchase agreement, with the acquisition expected to be completed in Q1 2025.

This will create a group with a balance sheet of £89bn as at 31 December.

The acquisition is expected to allow Coventry Building Society (CBS) to “leverage its financial scale” and “diversified funding base” to invest in its branches and customer services and expand its footprint.

CBS said it would remain a mutual and committed to being an independent, member-owned building society.

The Co-op Bank will be integrated into the mutual “gradually over the years” and during this time the two will operate under their current brands.

In a joint statement issued today, they said customers of the combined group will benefit from the expanded range of products and propositions on offer.

“It is the company’s current intention that eligible bank customers will become members of the company within a period of time after completion.”

For now, there is no change for existing customers – whether you are a saver or a borrower.

Each firm will retain their respective banking licenses during this initial phase, so members and customers of each organization will continue to have the same Financial Services Compensation Scheme (FSCS) protection, up to £85,000.

But they will work to integrate their services in the future.

The combined group will be led by David Thorburn as chairman and Steve Hughes as chief executive.

The Co-op Bank will become a subsidiary of CBS when the acquisition is completed and will operate with a separate independent board after completion.

The cash required for the acquisition of The Co-op Bank will be funded from CBS’s existing cash resources on completion.

In line with its existing policy, the bank expects to pay a dividend in FY24, subject to meeting capital requirements, having sufficient distributable reserves and subject to board approval.

“A transformative moment for members and customers”

The mutual board said it had “carefully considered” whether a membership vote was needed.

The statement said: “Having regard to the requirements of the Building Societies Act 1986 and following thorough and detailed professional assessment and advice, the board has conclusively determined that a vote of members is not required.

“In making this decision, the CBS board was informed by member surveys and focus groups, which clearly signaled their priorities as maintaining our value proposition and quality of service.”

But the acquisition is subject to regulatory approval, although it is expected to close early next year.

Of the cash consideration, up to £125m will be deferred for three years following completion and subject to The Co-op Bank’s performance.

David Thorburn, chairman of Coventry Building Society, said: “I believe this is a transformational moment for members and customers of the society and The Co-operative Bank. We are building on our shared heritage and creating a stronger joint business that will benefit our current and future members.”

Steve Hughes, Chief Executive of Coventry Building Society, added: “By bringing Coventry Building Society and The Co-operative Bank together, we will be able to deliver more value to more people over the coming years. I am excited about the opportunities ahead; most importantly, our ability to support the great value and outstanding service that matters most to our members.”

In April, the two had reached non-binding terms for a £780m cash buyout.

Just yesterday, as part of Nationwide’s annual financial results, it confirmed it was making “good progress” on its plan to buy Virgin Money, which it expects to complete in Q4 2024.