Another building society merger on the cards
Coventry Building Society, the third biggest in the UK, is in the early stages of merger talks with smaller rival Stroud & Swindon.
This could create a combined group with more than £20 billion in assets. However, Coventry says the merger "would only proceed if it were to the benefit of both sets of members."
Linda Will, marketing director at Stroud & Swindon, says the board was considering the proposal but added that no final decision had been made.
“There are no offers on the table. It is part of the board’s fiduciary duties to consider an approach from any credible partners,” she adds.
Following the onset of the financial crisis, the Financial Services Authority has demanded that building societies hold more capital - leading to increasing pressure for them to merge. But Will denies this was the case.
“We are not being forced by the FSA,” she adds. “We hold a huge amount of capital.”
Stroud & Swindon has 265,000 members and holds just under £3 billion in assets. Meanwhile Coventry has 1.2 million members and a 48-strong branch network across the Midlands.
Stroud & Swindon recorded a loss of £3.4 million in 2008. Meanwhile, last week, Coventry reported pre-tax profits had more than doubled in 2009 to £56.2 million.
The move follows the tie-up between Skipton Building Society and its loss making rival Chesham, which was announced back in February as another wave of consolidation ripples through the sector.
The enlarged group will have a 92-strong branch network and £15 billion worth of assets.
Last year, Britain's second largest mutual Yorkshire Building Society merged with loss-making rival Chelsea. Meanwhile, Nationwide - by far Britain's biggest building society - has stepped in with takeovers of the Cheshire and Derbyshire building societies.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
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.