Britannia and Co-Op to create super-mutual
Britannia and the Co-Operative have confirmed that they will merge to create a super-mutual.
The merged business will create a business with £70 billion of assets, nine million customers, 12,000 employees, more than 300 branches and 20 corporate banking centres.
The two organisations say it will also be strongly capitalised and well placed to cope with the economic downturn.
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 - which, 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.
Britannia group chief executive, Neville Richardson, will head up the combined mutual while the Co-Operative’s non-executive chairman, Bob Burlton, will chair the new board.
Rodney Baker-Bates, the current chairman of Britannia, says: "The combined and complementary strengths of our businesses will offer customers a strong, fair and ethical alternative to banking plcs.
“Customers will be owners and will have available all the services they would expect from a major financial provider, together with a real say in setting strategy combined with a share of the profits."
Burlton adds: "Both businesses have been pursuing successful strategies independently and are strong in their own right but we recognise we could be even more successful by coming together to create the UK's most trusted financial services business."
Britannia members will vote on the merger at a general meeting scheduled for 29 April 2009. If approved, both brands will continue to be used as well as the Smile internet bank and Platform mortgage brands.
However, the combined group eventually plans to introduce a single product range.
The Financial Services Authority has confirmed that savers who have accounts with both organisations will retain their £50,000 protection with both businesses under the Financial Services Compensation Scheme.
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.