Britannia and Co-operative Bank unveil plans for
super-mutual
The Boards of Britannia Building Society and The
Co-operative Bank – two of the biggest customer-owned
financial services businesses in the UK – today confirm they have
agreed to merge to create a super-mutual as a unique, ethical
alternative to shareholder- and Government-owned banks.
The new business will combine The Co-operative Bank's
strong personal and corporate banking, insurance and investment
expertise with Britannia’s extensive high street presence and
savings and mortgage product strength.
Combining The Co-operative Bank, part of the world’s
biggest consumer co-operative, with Britannia, the UK’s second
biggest building society, will create a business with £70 billion
of assets, nine million customers, more than 12,000 employees, more
than 300 branches and 20 corporate banking centres. The
business will be strongly capitalised, with a pro forma Tier 1
ratio of 9.8% as at 31 December 2008 on a comparable basis.
The business will be led by current Britannia group chief
executive Neville Richardson. Bob Burlton, the
current non-executive chairman of The
Co-operative Bank will chair the new
board. The Co-operative Bank's chief financial
officer Barry Tootell will become the new chief financial
officer.
After supporting the integration process, The
Co-operative Bank chief executive David Anderson will
leave the business. Britannia chairman Rodney Baker-Bates
commented: “The combined and complementary strengths of our
businesses will offer customers a strong, fair and ethical
alternative to banking plcs. Customers will be owners and will have
available all the services they would expect from a major financial
provider, together with a real say in setting strategy combined
with a share of the profits.”
The Co-operative Bank chairman Bob Burlton
added: “This move will accelerate the momentum within the
co-operative and mutual sector. Both businesses have been
pursuing successful strategies independently and are strong in
their own right but we recognise we could be even more successful
by coming together to create the UK’s most trusted financial
services business.”
The new business will be a wholly owned subsidiary of The
Co-operative Group, one of the world’s largest and most successful
consumer co-operatives with core business interests in
financial services, food, travel, pharmacy and funeral care.
Britannia members will become members of The Co-operative Group
and will need to approve the deal in a vote at a general meeting
expected to take place on 29 April 2009.
Customer benefits
Customers will be able to access the full range of banking,
savings, investment, insurance and mortgage services from an
expanded network of more than 300 branches, British-based call
centres and the internet after integration of the two businesses,
which is expected to take up to three years.
The new business will continue to trade under the Britannia and
Co-operative brands, as well as the Smile internet bank and
Platform intermediary lender brands. It will look to move
quickly to a single product range once the necessary integration of
customer systems is complete, but customers will see no immediate
change to the products and services they receive.
Britannia and The Co-operative Bank are committed
to continuing their high levels of member involvement in the
combined business. Britannia operates a unique Members’
Council and The Co-operative Group is highly regarded for its
member democracy.
Both businesses also have a tradition of sharing profits with
their members -Britannia through its Membership Reward and The
Co-operative Bank through the Co-operative
dividend. Customers will have the potential to earn greater
member rewards through the wider range of products offered by the
most broadly based and diversified financial services mutual in the
UK, and through wider membership of The Co-operative Group.
The combined business will expect to deliver more than £60
million a year in efficiency and revenue benefits from year three
and, as a customer-owned business, customers will share in these
savings through more competitive rates, improved customer service
or increased member dividends.
Both organisations have remained active in the mortgage and
personal and corporate lending markets over the last year, and
expect the new business will be in a stronger position to expand
lending after the merger.
Employees and locations
The merged business will continue to have a significant presence
in Leek and Manchester. Combining the two branch networks
will increase the number of branches available for customers to
more than 300. Where there are two branches in the same town,
these may be merged in due course but there will be no compulsory
redundancies among branch staff as a result of the merger.
It is expected that there will be some reduction in roles during
the three-year integration process, however significant synergy
benefits are also expected from procurement and supplier
savings. Any compulsory redundancies will be kept to a
minimum through redeployment, re-training and normal staff turnover
over the three-year timeframe.
The new business is committed to working with all recognised
trade unions to effectively manage any changes.
What happens next?
The merger has been enabled by new legislation which, for the
first time, allows mergers between different types of mutuals while
maintaining mutual ownership. A draft statutory instrument
under the Building Societies (Funding) and Mutual Societies
(Transfers) Act 2007 - known as the Butterfill Act, after its
sponsor Sir John Butterfill MP - was laid before both Houses of
Parliament on 19 January 2009 and, subject to approval by both
Houses, is expected to become law in March.
Details of the proposed merger are expected to be sent to
Britannia members in March 2009, and they will be asked to endorse
the proposals at a general meeting, expected to be held on 29 April
2009.
The FSA has confirmed that the enlarged business will be
eligible to apply for HM Treasury’s credit guarantee scheme and
that no external capital raising is required at this stage.
The merger is expected to become effective in the summer, subject
to confirmation by the FSA.
Commentary
David Anderson said: “The co-operative and mutual
movements have never been more relevant. Owing to the damage done
by the credit crunch, people have been crying out 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 as a result.”
Neville Richardson said: “This proposed merger offers a
unique opportunity to create a new force in British financial
services – strongly capitalised and with the scale to offer
customers a full range of products and services that are ethical,
mutual and co-operative.
“Britannia members have an historic opportunity to help create a
new way of doing business in British financial services by voting
to bring together two leading customer-owned businesses with
unrivalled reputations for social responsibility, customer
satisfaction, employee engagement and member democracy. They
can choose to be part of something good.”
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