Super-mutual now open for business
The merger between Britannia and the Co-operative Financial Services - creating a super-mutual - formally went through this weekend and is now open for business.
The move combines Britannia's branch network with the Co-operative Bank, which also includes internet bank Smile, as well as Co-operative’s insurance and investment divisions.
The combined group will hold £70 billion in assets, nine million customers, 12,000 staff, more than 300 branches and 20 corporate banking centres.
Britannia and Co-Operative previously said the new venture will be well placed to cope with the economic downturn, and expect it to deliver £60 million a year in revenue benefits and efficiency savings.
All three million Britannia members have already joined or been given the opportunity to join the Co-operative Group.
Although both companies will retain their independent products and brands as the two businesses are integrated, Co-operative plans to standardise rates on all similar financial products.
As part of this, from today, around 35,000 homeowners with SVR-linked Britannia mortgages will see their interest rate fall to 4.24% from their previous rate of 4.49%.
Former Britannia group chief executive Neville Richardson will lead the new group, with Bob Burlton, the current Co-operative Financial Services non-executive chairman, chairing the new board.
Richardson says: “Trust has become a scarce commodity in other financial businesses of late and we aim to provide a genuine alternative to those disillusioned with shareholder owned banks; ours will be an ethically-led organisation, which will reward members and be completely accountable to them.”
Burlton adds: "This merger creates a mutual organisation with the scale, financial strength and reputation to provide a wide range of enriched ethical products to millions of UK households, and we are doing this at a time when many people are calling into question the integrity of their banks."
In April, more than 450,000 Britannia members voted nine-to-one in favour of creating the member-led financial services business, which is a wholly-owned subsidiary of the Co-operative Group.
The move was approved by the Financial Services Authority, the regulator, over the weekend and the combined business was legally formed on 1 August.
The Co-operative Group is the world’s largest consumer co-operative - with an annual turnover of over £14 billion and over 4,500 UK outlets which span its core business interests in the food, financial services, pharmacy, travel and funeral care sectors.
The merger was first confirmed in January this year.
Every mortgage lender has a standard variable rate of interest, or SVR, on which it bases all its mortgage deals, including fixed and discounted rate and tracker mortgages. When special deals come to an end, the terms of the deal usually state that the borrower has to pay the lender’s SVR for a period of time or pay redemption penalties. The lender’s SVR is, in turn, based on the Bank of England’s base lending rate decided by the Bank’s Monetary Policy Committee (MPC). Every time the MPC raises its rate, mortgage lenders generally increase their SVR by the same amount but when the MPC lowers its rate, lenders are often slow to pass this on or don’t pass on the full cut to borrowers.