Co-op Bank enters exclusive merger talks with Coventry Building Society

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Co-op Bank has entered exclusive talks to merge with Coventry Building Society, in a deal that would see the private equity-owned high street bank return to mutual ownership.

Co-op Bank said on Thursday that it had started the talks with Coventry Building Society, the UK’s third-largest mutualised lender, to “better evaluate the merits of a combination”.

Earlier this month, Coventry submitted a bid for the Co-Op Bank that valued it at more than £700mn, according to two people familiar with the talks. A deal would result in the merged group with about £90bn in assets.

Co-op Bank, which has been backed by US-based investors including Bain Capital Credit and JC Flowers after a £700mn rescue deal in 2017, had kicked off an auction process earlier this year.

The lender returned to profit in 2021 and reported a pre-tax profit of £81mn for the first nine months of the year.