Coventry Building Society has agreed to buy Manchester-based Co-operative Bank Holdings for £780 million in cash, as it looks to establish a national footprint and grow its banking, mortgages and savings business. 

The deal, which was agreed in principle last month, is set to complete in the first quarter of 2025. £125 million of the purchase price will be deferred for three years from completion subject to the future performance of the bank.

Coventry said the combined group had a pro forma balance sheet of £89 billion at the end of last year. It said the increase in scale and funding would give it an established position in the personal current account market, broaden its channels and distribution capabilities with an enlarged national branch footprint and get it into the business banking market. 

Member-owned Coventry said it will remain a building society following completion of the acquisition and is committed to continuing to play an important role in maintaining a strong mutual sector.

The combined group will be led by Coventry chairman David Thorburn and Coventry CEO Steve Hughes.

“I believe this is a transformational moment for members and customers of the Society and The Co-operative Bank,” said Thorburn. “We’re building on our shared heritage and creating a stronger mutual business that will deliver in the best interests of our current and future members.”

Coventry said it will seek to integrate Co-op Bank gradually over several years. During this period, Coventry and Co-op will continue to operate under their current names and branding while the work required to provide more integrated services in the future is carried out. Both will retain their respective banking licences during the initial phase, so members and customers of each organisation will continue to have the same Financial Services Compensation Scheme protection.

Coventry said that after taking professional advice, it has determined that a vote of its members on the deal is not required. 

Co-operative Bank chairman Bob Dench said: “This transaction sees The Co-operative Bank returning to mutuality.  

“I am very proud of all those who have worked so hard over so many years to rebuild the bank. I am sure the Coventry Building Society will prove to be a very good home for us.”

Co-operative Bank CEO Nick Slape said: “I am proud of what has been achieved in recent years.

“We have successfully transformed and simplified the bank into one that is now sustainably profitable with a strong capital and liquidity position.

“This transaction is a natural next step and presents an exciting opportunity.”