Co-operative Bank in exclusive merger talks with Coventry Building Society

The Co-operative Bank is considering a merger with Coventry Building Society following a strategic review launched in November.

The lender, which has been the subject of a number of undisclosed offers from potential buyers, said today it was in ‘exclusive discussions’ with Coventry Building Society to ‘evaluate the merits of a combination’.

Co-op last month launched a strategic review and was rumoured to be on the verge of being taken over by the likes of specialist lenders Shawbrook, Aldermore and Paragon Banking Group.

The bank launched a strategic review last month 

Its chief executive Nick Slape said in March that rising interest rates could spark a wave of mergers involving smaller banks – and suggested his own firm could become a target.

Co-op Bank more than quadrupled its profit in 2022 to £132.6million on the back of higher rates.

It marked a major turnaround for the lender, which was on the brink of collapse before being rescued by a group of US hedge funds in 2017.

But it suffered a dip in profit during the nine months to the end of September after acquiring Sainsbury’s mortgage portfolio comprised of approximately 3,500 customers and £500million of balances.

Co-op said at the time that its first portfolio acquisition in more than a decade ‘highlights the bank’s turnaround and focus on both organic and inorganic opportunities’.

The group said: ‘The bank confirms that, following receipt of non-binding proposals from potential acquirers, it has entered a period of exclusive discussions with Coventry Building Society.

‘This period of exclusivity will enable the Society and the Bank to better evaluate the merits of a combination. 

‘There is no certainty that these exclusive discussions will result in a transaction. A further update will be provided in due course.’

Coventry Building Society – Britain’s second largest mutual – confirmed it had ‘entered into an exclusivity agreement in relation to a possible offer for The Co-operative Bank’.

It added: ‘A transaction will only be pursued if it is determined by the society’s board to be in the best interests of current and future members.’