Britannia and Co-operative to create 'super-mutual'

Two of the UK's biggest customer-owned banks are to merge to create a "super-mutual", it was announced today.

Co-operative Financial Services and Britannia building society have agreed the deal, which will create a business with £70 billion of assets, nine million customers and more than 300 branches.

The new business will provide a "unique, ethical alternative to shareholder - and Government - owned banks", a joint statement said.

Customers will see no immediate change as the new business will continue to trade under the Britannia and Co-operative brands, as well as the Co-op's Smile internet bank.

The merged company will only take on a single brand name after a process of integration - which is expected to last up to three years.

Britannia chairman Rodney Baker-Bates said: "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."

Both companies have schemes whereby they pass a share of profits to customers and the firms said customers could earn greater member rewards after the merger.

The joint statement said the new business would continue to have a significant presence in Leek, Staffordshire and Manchester, where Britannia and the Co-operative currently have their respective headquarters.

However, there would be a reduction in roles during the merger. It said where there were two branches in the same town, these could be merged, but stressed there would be no compulsory redundancies among branch staff.

The statement said both businesses had been active in the mortgage and personal and corporate lending markets over the last year and the statement said the merged firm would look to expand lending.

Co-op Financial Services chief executive David Anderson said: "The co-operative and mutual movements have never been more relevant.

"Owing to the damage done by the credit crunch, people have been crying out for a new way of doing business with a financial organisation of substance that truly has their interests at heart - this merger will create that organisation and we'd hope to attract many thousands of new customers as a result."

Co-operative Financial Services is part of the Co-operative Group, the world's largest consumer Co-op. It has a personal and business banking franchise as well as a life and general insurance operation.

Britannia will become a wholly owned subsidiary of the Co-operative Group in the merger and its customers, who still have to approve the deal, are to become its members.

Details of the proposed merger are expected to be sent to Britannia members in March, and they will be asked to endorse the proposals at a general meeting, expected to be held on April 29.

Britannia is the second largest building society in the UK, but has around one-fifth of the assets held by market leader Nationwide.