If approved, the merger will be the first time a building society and co-opertive have merged since the legal frameworks to allow such an event were put in place through Sir John Butterfill MP’s Building Societies (Funding) and Mutual Societies (Transfers) Act was brought into law recently.
Voting packs were sent out in preparation for Britannia’s AGM on April 29th and asks members to approve a merger with CFS, which is being recommended by its Board. A total of 1.1 million members are eligible to vote and approval must come from 75 per cent of voting savers and 50 per cent of voting mortgage members for the deal to go ahead.
Earlier this month, the building society announced a drop in pre-tax profits to £23.8m from £114.6m the previous year, which was caused by exposure to failed banks and payments to the Financial Services Compensation Scheme.
Britannia was exposed to £57.4m in losses from the collapse of Lehman Brothers and Kaupthing, where the society had short-term deposits. Following the collapse of the Icelandic banks and Bradford and Bingley, Britannia had to provide nearly £20m to the Financial Services Compensation Scheme fund.
The building society said 154,000 new members joined last year, and reported trading profit up 23 per cent to £158.2m. Members also received a £19m pay-out in membership rewards.
Britannia Group Chief Executive Neville Richardson, who will head the merged Britannia/CFS business if approved, said: “The world economy is in disarray and no bank or building society is immune to what’s been going on. 2009 will be another difficult year as the global recession impacts on employment and customer confidence.
“Last year was one of consolidation. By continuing to put our members first and focusing on financial strength, we’ve proved our resilience and the sustainability of our business model.
“Britannia has always been committed to putting its members and customers first. We can improve our member offer by merging with CFS, a customer-owned organisation with very similar values. Both Britannia and CFS have been pursuing successful strategies independently, but the current lack of trust in shareholder-owned banks gives us a real opportunity to be even more successful by coming together.
“In creating the first super-mutual, we’ll preserve all that our customers hold dear about Britannia – being mutually-owned, giving them a say in how the business is run, sharing profits with them and maintaining an extensive branch network – while building a bigger, stronger combined business with more branches, a better internet service, a wider product range and the chance to earn even greater member rewards.
“I truly believe this is a bright, exciting future for Britannia’s members.”
David Anderson, Chief Executive of CFS, added: “I genuinely believe that if Britannia members vote yes then it will be transformational not just for the Co-operative Movement but for the UK financial services’ sector as a whole.
“The co-operative and mutual movements have never been more relevant. Owing to the damage done by the credit crunch, people are now looking for a new way of doing business with a financial organisation of substance that truly has their interests at heart — this merger will create that organisation and we’d hope to attract many thousands of new customers and members as a result.”
• In its annual results next month CFS is expected to announce that write-downs were in the tens of millions, rather than billions as reported by other banks. The Bank is also set to report that deposits in accounts have increased, and the uptake for new current accounts has risen by 65 per cent during 2008.