LONDON, UK: Coventry Building Society (CBS) has reached an agreement to acquire The Co-operative Bank Holdings p.l.c., the parent company of The Co-operative Bank p.l.c. (Bank Holdings). This acquisition, valued at £780 million, will see CBS take control of the entire issued share capital of Bank Holdings.

The deal, which is expected to be finalized in the first quarter of 2025, will result in a formidable financial entity with a combined pro forma balance sheet totaling £89 billion as of 31 December 2023. The acquisition is poised to enhance CBS’s offerings in mortgages and savings while introducing a robust personal current account and business banking proposition to its members.

Under the terms of the share purchase agreement, shareholders of Bank Holdings will receive a total cash consideration of £780 million, with up to £125 million being deferred for three years, contingent upon the bank’s future performance.

Coventry Building Society (CBS), a stalwart of the mutual sector, reaffirms its commitment to remaining an independent, member-owned building society. The integration of The Co-operative Bank will be a gradual process, ensuring continuity of service and protection under the Financial Services Compensation Scheme for both entities’ members and customers.

The merged group will be led by David Thorburn as Chairman and Steve Hughes as CEO. The Co-operative Bank will operate as a subsidiary of CBS, maintaining its independent board post-acquisition.

This strategic move is expected to bolster CBS’s position in the market, leveraging its financial scale and diversified funding base to deliver enhanced member value and investment in service across various channels.

The shared heritage and values of CBS and The Co-operative Bank, along with their highly skilled and engaged workforce, are anticipated to drive the growth and success of the combined group. The focus will remain on effective communication and engagement with colleagues throughout the transition period.

The acquisition represents an implied multiple of 0.6x the Bank’s tangible book value as at 31 December 2023.  The cash consideration necessary to satisfy the Acquisition in full will be funded from the Society’s existing cash resources at completion. 

In line with its existing policy, the Bank expects to pay a dividend in FY24 subject to meeting capital requirements and having sufficient distributable reserves, subject to Board approval.

Leverage would become the combined group’s binding capital constraint and CBS expects the combined group to have a strong pro-forma capital position with a leverage ratio of approximately 4.4% and a common equity tier 1 ratio of approximately 21%, comfortably above the applicable regulatory minimums.

CBS also expects the combined group’s liquidity ratios to be well in excess of regulatory requirements.

These estimated pro-forma positions are illustrative only and have been calculated using unaudited estimates of the position as at 31 December 2024 prepared by CBS. More information in relation to these estimates is set out in Appendix 1 to this announcement.

The combined group will be subject to the consolidated supervision of the PRA.

Chairman of Coventry Building Society, David Thorburn commented: “I believe this is a transformational moment for members and customers of the Society and The Co-operative Bank. We’re building on our shared heritage and creating a stronger mutual business that will deliver in the best interests of our current and future members.”

Chief Executive Officer of Coventry Building Society, Steve Hughes commented: “By bringing together Coventry Building Society and The Co-operative Bank we will be able to deliver more value to more people in the coming years. I am excited about the opportunities that lie ahead, most importantly, our ability to sustain the great value and outstanding service that matters most to our members.”

Chairman of The Co-operative Bank Holdings p.l.c., Bob Dench commented: “This transaction sees The Co-operative Bank returning to mutuality.  I am very proud of all those who have worked so hard over so many years to rebuild the Bank. I am sure the Coventry Building Society will prove to be a very good home for us.”

Chief Executive Officer of The Co-operative Bank Holdings p.l.c., Nick Slape commented: “I am proud of what has been achieved in recent years. We have successfully transformed and simplified the Bank into one that is now sustainably profitable with a strong capital and liquidity position. This transaction is a natural next step and presents an exciting opportunity.”

Coventry Building Society is an award-winning savings and mortgage provider, currently the 8th largest UK lender with mortgage balances at £50.3bn at the end of 2023. As a mutual, it is owned by and run for the benefit of its members (customers with an eligible savings account or mortgage). It has around 2 million members across the country.

The Society employs more than 3,000 colleagues and has been consistently recognised for being a great workplace. In 2024 it was named as 11th on the list of best super-large companies to work for in the UK by Great Places to Work. It has also been recognised as a Great Place to Work for women, for wellbeing, and as one of the best workplaces in financial services and insurance.

www.coventrybuildingsociety.co.uk

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