One of Britain's biggest building societies to take over Co-op Bank

The Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority have approved Coventry Building Society's acquisition of The Co-operative Bank, a deal worth £780m. The two lenders announced on Thursday that the takeover, which was agreed upon in May, is set to be completed by 1 January 2025.

The Co-op Bank will return to mutual ownership as a subsidiary of Coventry, with both lenders retaining their own banking licences. Coventry plans to gradually integrate Co-op Bank over several years, as reported by City AM.

The combined business, with approximately £89bn in assets, will be roughly the same size as Virgin Money, Britain's sixth-largest high street bank. Coventry, already one of the UK's largest mortgage providers, will gain a significant presence in the personal current account and business banking markets, as Co-op Bank has around 2.6m retail customers and more than 93,000 small and medium-sized enterprises.

This merger comes amid a wave of M&A activity among Britain's mid-sized lenders, as larger players flush with cash from higher interest rates capitalise on smaller rivals struggling with cost pressures and a lack of scale compared to the dominant banks. Nationwide, Coventry's rival, completed its £2.8bn takeover of Virgin Money at the start of October, resulting in a £2.3bn accounting gain for the country's largest mutual.

Both Coventry Building Society, with over two million members, and another society have faced scrutiny over their decision not to put their deals up for member votes. Meanwhile, supermarkets Tesco and Sainsbury’s have withdrawn from financial services this year, selling the majority of their banking arms to Barclays and Natwest respectively.

Co-op Bank has been in talks with several companies about potential consolidation in recent years. In 2021, it approached Spanish bank Banco de Sabadell about acquiring high street competitor TSB, but discussions did not advance.