Coventry building society in merger talks with smaller competitor

The Coventry building society has today confirmed talks are progressing with the Stroud and Swindon building society to create a group which would have around £20 billion in assets. While talks are at a very early stage it is believed that the Coventry building society, with 1.2 million members and 48 branches, and the Stroud and Swindon building society, with 265,000 members and 43 outlets, are keen to try and structure a deal acceptable to both parties.

Any potential offer from the Coventry building society would need to be approved by savings and borrowing members of the Stroud and Swindon building society as well as the Financial Services Authority. This move is a reflection of the ever-changing financial environment in the UK, with regulatory costs continuing to rise, which is pushing more and more financial institutions towards takeovers and mergers.

Whether this is the beginning of a new wave of mergers in the building society sector remains to be seen but there is no doubt that competition in the sector is increasing and the smaller operations are struggling to keep their heads above water. Due to a different regulatory setup for the building society sector, the societies in the UK do not have as much access to money market funds as traditional UK banks which many believe puts them at a disadvantage.