Britannia Co-op merger creates powerful force

The final stage of the merger between Britannia and The Co-operative Financial Services (CFS) is now complete. Following the overwhelming support from members together with final approval from the FSA, the new business was legally formed on August 1, 2009.

The merger will create a trusted and ethical alternative to shareholder-owned banks, through the most diverse financial mutual in the UK. The new organisation will have a robust capital position, excellent liquidity and funding underpinned by strong underlying profits.

The business will be strongly capitalised, with a pro forma Tier 1 ratio of 9.2%, loans essentially fully funded by own customer deposits.

Britannia becomes part of CFS and brings together Britannia's extensive high street presence and savings and mortgage product strength, with the personal and corporate banking, insurance and fund management expertise of CFS. The new business will have:

More than £70 billion of assets
Nine million customers
More than 12,000 employees
More than 300 branches
20 corporate banking centres

In April Britannia members voted nine-to-one in favour of creating this new member-led financial services business, which is a wholly-owned subsidiary of The Co-operative Group. The 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 funeralcare sectors.

The merger will create a large financially strong and well diversified mutual business operating in both retail and corporate markets, providing customers with a greater choice of products through diverse distribution channels. As part of the Co-operative Group, the new business will be characterised by its unique ethical and member reward policies and very high levels of customer advocacy.

The business will be led by former Britannia group chief executive Neville Richardson, with Bob Burlton, the current CFS non-executive chairman, chairing the new CFS board.

Bob Burlton comments: "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".

All three million Britannia members have already joined or been given the opportunity to join The Co-operative Group, where they will continue to earn financial rewards on their existing Britannia products, and in addition will have the opportunity to earn even greater rewards by purchasing qualifying products from across The Group's family of businesses.

Neville Richardson, chief executive of The Co-operative Financial Services, stated; "Through this merger, we take the next step in the renaissance of the co-operative and mutual sector. 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."

The Co-operative Financial Services will now comprise; The Co-operative Bank - including the Britannia business and internet bank smile - The Co-operative Investments and The Co-operative Insurance.

Both CFS and Britannia will retain their independent products and brands as the two businesses are integrated. The intention is to provide consistency across rates on all similar products as soon as possible to offer honest, fair value for all customers. The first example of this is occurring straight away, where over 35,000 Britannia members on SVR linked mortgages - 15% of the Britannia mortgage book - are seeing their interest rate fall to 4.24% from their previous rate of 4.49%.

The expanded branch network will be core to the new business and plans are already underway to allow customers from Britannia and The Co-operative Bank to transact in all branches in due course."

Neville Richardson concludes; "The changes to SVR are the first example of our approach. By harmonising rates to the lower SVR, we are placing fairness to members, ahead of margin, because it is the right thing to do and we have the financial strength to do it. Our challenge now is to work hard to deliver the benefits we have promised, as soon as possible. From day one, we will be founded on the principles of trust and reward and provide the scale and strength to meet the expectations of consumers in today's uncertain climate."