Can the Co-op be a new force for good?
Lloyds has agreed to sell the mutual 632 of its branches. Will it help turn the bank into a serious rival?
The once-tiny Co-operative Bank is set to have nearly 1,000 branches when the £350m, rising to £750m, agreement to buy a large swathe of Lloyds Banking Group's network completes next year.
The deal to buy 632 branches, which has yet to be approved by the City regulator, the Treasury and the European Commission, will give the Co-op a huge high street presence, catapulting it into being a "challenger" to the traditional big names of Barclays, HSBC, Lloyds, NatWest and Santander.
In fact, the battering the big names have taken in recent weeks, after the RBS/NatWest computer cock-up and Barclays' Libor scandal, has seen a 60 per cent increase in the number of people switching to the Co-op.
"People have been taking a personal stand against bank scandals and moving their money to local, ethical or mutual financial institutions that they feel they can trust," pointed out Liberal Democrat MP Susan Kramer.
"The Co-op, and other local, ethical or mutual banks, have a vital role to play in making our banking sector more diverse. This deal will help throw open the retail-banking market, give a boost to mutual banking and help the industry move back to responsible banking that benefits the wider economy."
People are attracted to the Co-op by its ethical credentials. But can it maintain its reputation after it triples the size of its branch network? Will it be able to manage control of 7 per cent of the current account market, bearing in mind that it has a relatively paltry 2 per cent now?
Last year, the Independent Commission on Banking said that any one bank hoping to challenge the existing "elite" has to have a strong enough presence in the market to provide a real alternative.
It said then that the only real challenger brand in the UK was the Nationwide building society.
But once the Lloyds deal goes through, the Co-op will have the sixth-largest bank branch network in the country. In Scotland, it will become the third-largest bank in terms of branch network.
But will the growth mean leaving behind its beliefs? No, says the Co-op. It was quick to reinforce its ethical commitments this week, a policy that ensures it never invests in nor does business with unethical companies. Specifically, it refuses to do business with arms manufacturers, those with poor labour records, and companies which develop high climate change emissions fuel.
Sarah Brooks, director of financial services at Consumer Focus, said: "The Co-operative Bank must use its new status to provide a real alternative to other banks with a focus on straightforward products and excellent customer service. Co-op must offer a point of difference and not just more of the same offered by the big five banks."
Co-op boss Peter Marks said: "We believe that this deal will help restore trust in a sector whose image has been badly tarnished over recent years and would allow us to genuinely challenge the status quo on the high street."
Kevin Mountford, head of banking at MoneySupermarket, approved.
"Hopefully, it will be the antidote the sector needs and encourage a culture of switching as the needs of the customer, and not the shareholders, come to the fore," he said.
The 4 million or so Lloyds customers who will be switched to the Co-op may not be so happy, especially if they are asked to leave behind a decent, low-rate mortgage deal.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Emergency call 'started off dumb, but got pretty serious'
Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'
Thought you'd seen it all after the Jeremy Paxman interview?
Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent
"History is violent," says the US Army tank commander Don "Wardaddy" Collier
Striker's four-month ban for biting an opponent expires on Friday
Mark Dampier: Woodford’s young companies could be the stars of the future
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: Something rotten in the cellar causes trouble up above
Weekly Money: round-up of the personal finance stories you may have missed 20-24 October
Bank-beating exchange rates on your international payments
- 1 This 'woman calls police to order pizza' story isn't going where you're expecting
- 2 Axe wielding man shot dead after attacking four New York policemen on busy street
- 3 Watch what happened when food critics were unknowingly served McDonald's
- 4 Jimmy Carr's Oscar Pistorius joke goes a bit too far at the Q Awards
- 5 Ottawa shootings: Bruce MacKinnon's cartoon is the perfect tribute to soldier Nathan Cirillo
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Residents should throw a street party and mix with immigrant neighbours, councils told
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
iJobs Money & Business
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
£100 - 125k: Guru Careers: A CTO / Chief Technology Officer is needed to join ...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village