The Co-operative Bank brand is on track to disappear from UK high streets, after Coventry Building Society confirmed it would acquire the bank from its hedge-fund owners in a £780m deal.
The deal was finalised after Coventry said it made a non-binding cash offer for the bank last month that will create a lender with almost 5 million customers and an £89bn balance sheet, and return the bank to its mutual roots.
While the new owner will keep the Co-operative Bank name throughout the integration period – which is likely to last “several years” – it has left the door open to dropping the brand long-term.
The move would dissociate the enlarged group from a series of scandals including an accounting blunder that left a £1.5bn black hole in its finances in 2013, and forced it to separate from the Co-operative Group and into new hedge-fund ownership.
Its reputation also suffered when the bank’s former chair Paul Flowers, an ex-Labour councillor and Methodist church minister nicknamed the “Crystal Methodist”, pleaded guilty to possession of cocaine, crystal meth and ketamine in 2014.
Coventry declined to comment on long-term plans for the brand, referring only to a published statement, which said the banks would “continue to operate under their current names and branding while we carry out the work needed to provide a joined-up service. We expect this to take several years.”
Coventry, which is the UK’s second largest building society by group assets, said it remained committed to mutuality and the deal would allow the newly combined lender to increase its share of the mortgage market as well as give it a position in the current account and business banking markets.
The Co-operative Bank, which has 2.5 million retail customers and 94,000 small business customers, will become a subsidiary of Coventry Building Society, marking a return to its mutual roots.
The ethical lender, which was founded in 1872, traces its origins back to the Co-operative Wholesale Society, the body that would become the Co-operative Group, which provided financial services to the wider co-operative member-owned movement in Britain.
Coventry said it does not need to seek a member vote for the deal under the Building Societies Act 1986. The structure of the Co-operative deal means that up to £125m will be deferred for a period of three years from completion, subject to future performance, and the transaction is expected to be completed in the first quarter of 2025, with integration taking place over several years.
The deal is part of a wave of consolidation among the banking sector this year, including Nationwide, the largest building society, which has agreed a £2.9bn takeover of Virgin Money. Nationwide also decided not to give its members a vote on the Virgin Money takeover.
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During the integration period, Coventry and Co-operative will retain their banking licences and will be headed by David Thorburn as chair and Steve Hughes as chief executive.
Thorburn, the chair of Coventry Building Society, called the deal a “transformational moment” for both organisations that would create a “stronger mutual business”.
Nick Slape, the chief executive of Co-operative Bank Holdings, said it was a “natural next step”.