Ethical Business Banking Coming to a Town Near You
An annoucement this morning by the Co-operative Group says that "non-binding heads of terms" have been agreed for the Co-operative Group to acquire a number of branches from Lloyds Banking Group (LBG) including former TSB and Cheltenham & Gloucester (C&G) brands.
This means that there will be a new force in banking on the high street with nearly 1,000 branches and offering consumers, domestic and business alike, another option of where to take their business.
Switching banks has become a hot topic in recent weeks as a number of high profile scandals have rocked Britain’s banks – The failure of IT systems at RBS, NatWest and Ulster Bank, was the first, followed by the LIBOR scandal at Barclays and, this week, HSBC were implicated in money-laundering allegations.
Britain’s biggest building society, Nationwide, said it had seen a 26% increase in the number of people opening and transsferring current accounts to the mutual.
The Co-operative Bank has what it calls a "customer-led ethical policy", a stance which it has asumed for 2 decades. When the bank launched its ethical policy back in 1994, 80% of customers supported the guiding principles. By 2001 that figure had risen to 97%. Social responsibility and ecological sustainability are core values in the Co-op’s ethical policy.
The acquisition will see the Co-operative Bank gain 632 branches from LBG with an estimated client base of around 4.8 million customers. The Co-op will pay £350 million up front and then pay an additional £400 million at a later date subject to performance. The figure is less than the reported offer of £1.5 billion for the banking group last year, of which the UK taxpayer is a 40% stakeholder.
Group CEO of the Co-operative Group, Peter Marks, said of the deal in principle,
“This deal would deliver the biggest shake-up in high street banking in a generation. Consequently, we believe this would be a great deal for customers, for the public, for UK banking generally and for The Co-operative Group, in particular.”
“It would be a great deal for customers because it would make the services of our member-owned, customer-led, ethically-driven, bank available to millions of people we’ve not been able to serve up until now.”
Addressing the concerns that taxpayers’ should be getting a return on their forced investment into the troubled LBG, Marks added:
“It would be a great deal for the taxpayer because as well as receiving a fair price up front, the deal would also mean they would share in the profits of the enlarged bank for years to come.”
Marks also commented on the reputation of banks in recent years:
“So far as UK banking generally is concerned, this would be a great deal because it would help restore trust in a sector whose image has been badly tarnished over recent years.”
Finalising the deal will see the Co-operative Banking Group increase its current 4% stake in the total number of high street branches in the UK increase to 10% with its share of personal account customers up from 1% to 7%.
The Co-op Banking Group’s 100,000 staff would see themselves in the "premier league" of banking, competing alongside the other big names, offering a real choice for consumers and greater conveniece for small businesses. Marks ended by trumpeting the stability of his ethically-led bank;
“Despite the crisis in the financial sector, our bank has continued to go from strength to strength, coming through the financial crisis in great shape and maintaining our ethical and socially responsible credentials. Whilst we are not at the end of the road yet, we are pleased to have reached this important milestone and look forward to continuing to work with Lloyds Banking Group to reach a final agreement.”