Britannia and Co-Op in merger talks
Britannia, Britain’s second biggest building society, is in talks with the Co-Operative about a possible merger.
Although the society says the talks are at a very early stage, it adds that the two businesses have a “strong cultural fit” and would represent a merger of “strong equals”.
Britannia is the second largest building society in the UK, following the merger of Portman into Nationwide in 2007. However, it is still a minnow in comparison to Nationwide, with £32,377 million of assets compared to the larger mutual’s £178,482 million.
It also owns a specialist mortgage lender - Platform Homeloans - that, prior to the credit crunch, was very active in the sub-prime and buy-to-let markets originating over 90,000 mortgages worth over £7 billion since its launch in 2003.
Despite the two organisations being different types of mutuals, forthcoming legislative changes will allow firms such as building societies, co-operatives and friendly societies to work together.
If the merger goes ahead, the combined organisations would have around £70 billion of assets and a total of six million customers.
Neville Richardson, group chief executive of Britannia, says: "Both businesses have been pursuing successful strategies and don’t need to merge, but we recognise we could be even more successful by coming together and creating the UK's most trusted financial services business.”
He refused to speculate on how the merger may impact customers and employees but added his fellow board members remained committed to its branch network and brand.
Back in June, the Chelsea - the 5th biggest building society - announced it was merging with the Catholic. And in September, Nationwide confirmed it is taking over the Derbyshire and Cheshire societies.
All sub-prime financial products are aimed at borrowers with patchy credit histories and the term typically refers to mortgage candidates, though any form of credit offered to people who have had problems with debt repayment is classed as sub-prime. Depending on the lender’s own criteria, sub-prime can apply to borrowers who have missed a few credit card or loan repayments to people who have major debt problems and county court judgments (CCJ) against their name. To reflect the extra risk in lending to people who have struggled in the past, rates on sub-prime deals are typically higher than for “prime” borrowers.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.