Co-op Bank has entered exclusive talks to merge with Coventry Building Society, in a deal that would return the private equity-controlled high-street bank to mutual ownership.
Coventry Building Society is the UK’s third-largest mutualised lender and earlier this month was reported to have submitted a bid for Co-op that valued it at north of £700 million.
A deal would result in a combined group with about £90 billion in assets.
Co-op Bank kicked off an auction process earlier this year and attracted interest from challenger banks Shawbrook, which made a £3.5 billion approach in August, and Aldermore (AIM:ALD).
Both ended their interest shortly after, however. A proposed deal with Cerberus Capital Management also broke down in 2020.
Analysts said Co-op Bank merging with the Coventry makes sense on paper, but would be a big step for the building society’s management.
Nationwide, with over £270 billion of assets, is currently the only mutually-owned banking group with the scale to challenge the high-street giants.
A combined Coventry BS and Co-op Bank would be roughly comparable in size to Virgin Money.