CFS and Britannia move to create £70bn super mutual

MANCHESTER’s Co-operative Financial Services is in talks with Britannia Building Society to create a £70bn “super mutual”.

CFS, which is part of the Co-operative Group, and the UK’s second biggest mutual confirmed today that they are at “very early stage” discussions about a number of tie-up options, including a possible merger.

However, any merger could depend on the result of the so-called Butterfill bill which will go before parliament at the end of the year.

The bill, named after its sponsor, Conservative MP Sir John Butterfill, is designed to remove legislation that prohibits mergers between building societies, friendly societies and co-operatives.

The tie-up between CFS and Britannia, which would create a mutual powerhouse of more than six million members with £70bn of assets, follows Nationwide’s planned takeover of the Cheshire and Derbyshire building societies.

In August, Britannia posted a sharp fall in half-year pre-tax profits from £50.5m to £31.2m after being hit by £40.4m of bad debts from de-faulting buy-to-let landlords.

In contrast, CFS profits soared almost 90 per cent to £73.4m in the six months to July 26 and bad debt levels fell.

Neville Richardson, chief executive of Staffordshire-based Britannia, denied that the society was dependant on a merger.

He said: “As two like-minded, forward thinking and financial strong mutuals, we’re are talking about how we can work together to create an exciting proposition for our members.

“Both businesses have been pursuing successful strategies and don’t need to merge, but we recognise that we could be even more successful by coming together and creating the UK’s most trusted financial services business.”

CFS, which operates the Co-operative Bank, CIS insurance and internet bank Smile, said: “We have ambitious growth plans and have had discussions with a number of parties including Britannia about how we can work more closely together for mutual benefit.

“There are clearly a range of possibilities open to us but we will only take action which benefits further the clear momentum occurring now within the co-operative and mutual sector.”

Britannia has a 250-strong branch network and more than 2.5m savers, while CFS, led by chief executive David Anderson, has a strong personal and business banking franchise. Both believe that by joining forces, people would be offered a customer-owned alternative to the plc market.

At this stage it is not clear if Britannia’s three million members would receive a windfall payment or the impact the merger will have on its staff.