Coventry, the third largest building society in the UK, has confirmed plans to merge with smaller rival Stoud & Swindon, to create a 91-strong branch network across the Midlands and the South West.
The combined mutual would also boast 1.5 million members and assets of over £21 billion.
The merger, which is still subject to the approval by Stroud & Swindon’s members as well as the Financial Services Authority, is expected to become effective on 1 September 2010.
Although the enlarged society will be called Coventry Building Society, the plan is to retain the Stroud & Swindon name as a separate brand.
Full details of the merger will be mailed to Stroud & Swindon members in mid-May, with eligible members invited to vote at a special general meeting on 16 June.
David Stewart, chief executive of Coventry Building Society, says: “I believe that the merger with Stroud & Swindon will help us build on recent successes and bring the benefits of our prudent and member-focused approach to a wider membership.”
It is expected that approximately two thirds of a total of 251,000 Stroud & Swindon savings accounts will see interest rates improved following the merger to match equivalent products offered by Coventry.
In addition, mortgage borrowers on the smaller society’s standard variable rate (currently 5.99%) could see their mortgage payments reduce as they’ll be moved Coventry’s SVR (currently 4.74%).
John Sutherland, chief executive of Stroud & Swindon, says: “We believe that Coventry’s commitment to long-term member value, fairness, strategic prudence and local communities, provides Stroud & Swindon members with the best possible future. We strongly recommend Stroud & Swindon members to vote in favour of the merger.”
Stroud & Swindon has 265,000 members and holds just under £3 billion in assets while 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 month, 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.
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.