Regulators have given the green light for Coventry Building Society to acquire The Co-operative Bank in January as consolidation sweeps through Britain’s mid-sized banking sector.
The two lenders said on Thursday that the Financial Conduct Authority and Bank of England’s Prudential Regulation Authority had approved the £780m deal, which was agreed in May.
The takeover is expected to be completed on 1 January 2025, with Co-op Bank returning to mutual ownership as a subsidiary of Coventry. The lenders will retain their own banking licences.
Coventry has said it intends to gradually integrate Co-op Bank over several years.
With roughly £89bn in assets, the combined business is set to be around the same size as Britain’s sixth-biggest high street bank, Virgin Money.
Already one of the UK’s biggest mortgage providers, Coventry will gain a boost in the personal current account and business banking markets as Co-op Bank boasts around 2.6m retail customers and more than 93,000 small and medium-sized enterprises.
The tie-up comes during a barrage of M&A among Britain’s mid-sized lenders as bigger players flush with cash from higher interest rates pounce on smaller rivals struggling with cost pressures and a lack of scale compared to the dominant banks.
Coventry’s rival Nationwide completed its £2.8bn takeover of Virgin Money at the start of October, which bagged the country’s biggest mutual a £2.3bn accounting gain.
Both societies have faced questions over their decision not to put their deals to votes among their members, of which Coventry has more than two million.
Elsewhere, supermarkets Tesco and Sainsbury’s have retreated from financial services this year by selling the bulk of their banking arms to Barclays and Natwest respectively.
Co-op Bank has been in discussions with several firms over possible consolidation in recent years. In 2021, it approached Spanish lender Banco de Sabadell over buying rival high street bank TSB, but talks failed to progress.
The 152-year-old lender was rescued from a potential taxpayer bailout in 2013 after it secured a lifeline from American hedge funds to plug a £1.5bn hole in its balance sheet, revealed after an aborted attempt to buy 632 branches from Lloyds.
It agreed a further £700m rescue package with investors in 2017, resulting in the bank becoming fully owned by private equity rather than The Co-operative Group.