The Co-op Bank could be returned to mutual ownership, according to news reports which say Coventry Building Society has submitted a bid to buy it.
Sky News, filing an exclusive on the story, said a tie-up between Coventry – the UK’s third largest building society – “would create a financial services powerhouse with close to £90bn in assets”.
The report, quoting an insider, says Coventry has made a non-binding offer for the Bank that values the lender at more than £700m, and is reportedly being advised by accountancy firm KPMG.
A spokesperson for Coventry said: “We remain open to opportunities that may enhance the value and services we offer to our current and future members, but we don’t comment on any public speculation.”
The Bank, which declined press requests for a comment, launched requests for a buyer in September this year and last month said it was “exploring potential strategic opportunities, the assessment of which is currently at a preliminary stage”.
Suitors include specialist lender Shawbrook, while another interested lender, Aldemore, reportedly withdrew from the process in October.
Sky notes that Coventry, which has 2 million members, “is regarded by peers and regulators as having a credible management team, led by Steve Hughes, its chief executive”.
But, it warns, “a takeover on the scale of the Co-operative Bank would represent a hugely ambitious move for an organisation which has undertaken few sizeable corporate deals”.
A merger with a building society would be a boost for the co-op mutual sector, which has mourned the loss of the Co-op Bank, which was owned by the Co-op Group until the cash crisis that followed its 2009 takeover of Britannia Building Society, with a £1.5bn hole discovered in its finances in 2013.
Over the following years the Group reduced its stake in the Bank before exiting completely in 2017, with the Bank taken over by bondholders. It is now owned by US-based investors including Bain Capital Credit and JC Flowers, and returned to an annual pre-tax profit in 2021.
It was allowed to keep the co-op name on the proviso that it maintains an ethical policy overseen by an independent director who will chair an ethics and values committee. It also provides support to the co-op movement through mechanisms such as funding for development programmes run by Co-operatives UK.
Ten years ago, a group of Bank customers launched the Save Our Bank campaign – with two aims: for the bank to maintain its strong ethical stance, and to see it eventually return to some form of co-operative ownership or control. In 2016 it launched a Customer Union, which is structured as a co-op.
A spokesperson said: “The Customer Union for Ethical Banking, the independent union for Co-operative Bank customers, welcomes reports that Coventry Building Society is looking to merge with the Co-operative Bank. This move would align perfectly with our dual goals: preserving the bank’s renowned ethical standards and steering it back towards co-operative ownership.
“Coventry’s ethical credentials, including its Fair Tax Mark certification and recommendation by Ethical Consumer, make it an ideal partner. As the Co-operative Bank’s current owners look for an exit, we believe Coventry offers not just a secure future but a path that upholds the core values of our members. Joining forces with a mutual that’s twice the size promises the sort of potential that we, as ‘Save Our Bank’ campaigners since our inception a decade ago, have fought for.”
