Co-op Bank returns to mutual ownership as Coventry BS signs deal

‘We’re building on our shared heritage and creating a stronger mutual business ‘

A share purchase agreement has been signed for the acquisition of the Co-operative Bank by Coventry Building Society in a deal worth £780m. The move is expected to complete in the first quarter of 2025.

“I believe this is a transformational moment for members and customers of the society and the Co-operative Bank,” said Coventry chair, David Thorburn. “We’re building on our shared heritage and creating a stronger mutual business that will deliver in the best interests of our current and future members.” 

Bob Dench, chair of the bank, added: “This transaction sees the Co-operative Bank returning to mutuality. I am very proud of all those who have worked so hard over so many years to rebuild the bank. I am sure the Coventry Building Society will prove to be a very good home for us.” 

The Coventry is the UK’s third-largest mutual lender with 2 million members and assets of £62.5bn. A joint statement from the organisations said the acquisition would “both deepen the enlarged group’s existing presence in mortgages and savings and extend the Coventry’s propositions” by introducing a business banking proposition to its offering. 

The combined group, which has a pro forma balance sheet of £89bn as at 31 December 2023, will integrate gradually over several years, said the statement, with combined group will be led by David Thorburn as chair and Steve Hughes (current Coventry chief executive) as CEO.  As a subsidiary, the Co-op Bank will continue to operate with a separate independent board post-completion.

The Coventry believes the move is “in the best interests of current and future members,” with the current intention being that eligible bank customers will become members of the society over a period of time.

However, members of the building society were not given a vote on the matter. “Following thorough and detailed assessments and professional advice, the board has conclusively determined that a member vote is not required.” said the statement.

“In coming to this decision, the Coventry board has been informed by member surveys and focus groups which clearly signalled their priorities as maintaining our value proposition and service quality.”

Rescued in 2017 and backed most recently by US-based investors including Bain Capital Credit and JC Flowers, the Bank has maintained links with the co-op movement, retaining its name in return for adhering to its ethical policy and working with apex body Co-operatives UK to support the sector.

Rose Marley, CEO of Co-operatives UK, said: “The Co-operative Bank’s return to mutualisation is a real positive. Co-operatives and mutuals provide fairer outcomes for people and society. They do more to help build an inclusive, growing and diverse economy. 

“Our evidence shows they strengthen economic resilience, contribute to growth and increase consumer choice, while also delivering value to their members.

“We’ll continue to work with the Bank on delivery of its co-operative values. That’s been a real success story – just look at all the new and stronger co-operative businesses that have emerged from the Business Support for Co-ops programme we deliver together. And we’re delighted that the Co-operative Bank is once again sponsoring this year’s Co-op Congress on 14 and 15 June in Birmingham, which has an incredible line-up of speakers.”

The announcement was also welcomed by Save Our Bank, the campaign which began in 2013 when the Co-operative Bank hit trouble, to ensure it stuck to its ethical principles, and to work for an eventual return to mutual ownership. It later launched the Customer Union for Ethical Banking, which is formally recognised by the Bank.

“Many said we were naive and that the Bank would never return to the co-operative movement,” said Shaun Fensom, on behalf of Save Our Bank team.

“Now, 10 years on, not only has the bank stuck to its ethical principles – actually strengthening them – but with this acquisition the bank will return to mutual ownership. We think this is great news for everyone who cares about the future of ethical banking and the co-operative movement.”

Fensom added that the organisation would be consulting with its members on the acquisition and the future role of the Customer Union, “for example working for the new group to maintain a leading role in the cooperative movement, as well as maintaining a customer-led ethical policy”.