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Co-op & Britannia To Merge

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It says here.

"Owing to the damage done by the credit crunch, people have been crying out for a new way of doing business with a financial organisation of substance that truly has their interests at heart" - but will it?

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It says here.

"Owing to the damage done by the credit crunch, people have been crying out for a new way of doing business with a financial organisation of substance that truly has their interests at heart" - but will it?

Stick to Nationwide if you don't want to help bankroll Gordon Brown's election campaign.

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It says here.

"Owing to the damage done by the credit crunch, people have been crying out for a new way of doing business with a financial organisation of substance that truly has their interests at heart" - but will it?

One word:

Platform

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I've been watching Mortgage rates, and these two lenders offer very good deals. Co-op 5yr fixed @ 4.49% 60%ltv £1500 fee with overpayments allowed.

BBC: http://news.bbc.co.uk/1/hi/business/7841581.stm

This is one thing that I've never understood. Why would any one in their right mind want to pay a fee to a bank to lend them money which they have to pay interest on? Totally crazy!

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This is one thing that I've never understood. Why would any one in their right mind want to pay a fee to a bank to lend them money which they have to pay interest on? Totally crazy!

Ok, these high fees are eye watering...

However, the benefit of adding the fee to the mortgage is if the house purchase falls through you usually don't get charged the fee. Whereas if you paid it separately, you would have lost the money. If over-payments are allowed (something I would want) you can pay that fee off straight away attracting no interest.

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The new business will be a subsidiary of The Co-operative Group and Britannia members will become Co-op members.

Hope there's nothing overly nasty in the Britannia woodpile (?)

And that there's no pay-out to Britannia members.

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Hope there's nothing overly nasty in the Britannia woodpile (?)

And that there's no pay-out to Britannia members.

You mean apart from Leek?

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Britannia folk will likely get pay out based on their trade, just like the Co-op folk.

I doubt that Co-op members will get anything (based on the takeover of Portman by Nationwide, when only Portman members got a payout).

I can't see why members of a mutual being taken over should automatically get anything apart from membership of the new society, particularly since the reason they want to be taken over is presumably that their own position is weaker.

If anything it's the members of the stronger institution whose asset is being diluted by the introduction of additional risks/obligations, and who should be compensated.

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Apparently this can only take place if some new legislation gets passed. Curiously it also allows for some new ways of raising funds.....hmmm...

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Britannia 13% PIBS (permanent interest bearing shares) dropped from 140 to 131.5 yesterday, so now yielding about 10% p.a.

Would the proposed merger with the COOP make their dividend payments less secure?

I would have thought the opposite, making them more attractive as an income producing investment.

Or was the drop due to increasing inflation expectations?

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The Building Societies (Funding) and Mutual Societies (Transfers) Act, known as the Butterfill Bill after its sponsor Sir John Butterfill MP, would give building societies greater freedom to merge with other companies.

It will also change the current restrictions on the way they are allowed to raise money.

Hmmm....'cause that's been proven to be a great idea in the past hasn't it. What's wrong with the way they're conducting business at the moment? :unsure:

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I doubt that Co-op members will get anything (based on the takeover of Portman by Nationwide, when only Portman members got a payout).

The Portman took over the Staffordshire BS, where I used to have an account. We got a payout at the time but it was nowhere near the massive amounts paid out when Woolwich demutualised. Hmm, what happened to them?

The Britannia BS and the Co-op have been discussing this since Oct 2008.

Edited by deflation

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The Portman took over the Staffordshire BS, where I used to have an account. We got a payout at the time but it was nowhere near the massive amounts paid out when Woolwich demutualised. Hmm, what happened to them?

The Britannia BS and the Co-op have been discussing this since Oct 2008.

Hi deflation,

Taken over by Barclays - Woolwich shareholders were given Barclays shares in exchange ...... Oh Dear

( Not sure if there was a cash option )

M21er

Edit: Beaten to it

Edited by M21er

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I think the Co-op should be worried about this takeover. In particular I seem to recall that Britannia was a 'bit of a player' in the BTL mortgage market.

A quick Google on HPC reveals that Britannia stopped lending to BTL in Dec 2007.

Platform, the specialist lender of Britannia Building Society, is withdrawing from the buy-to-let market on Monday. A number of other lenders, such as Northern Rock, Paragon, and GMAC, have pushed rates high enough to virtually – and deliberately – price themselves out of the market, according to broker John Charcol.

and this opinion from Togo Jo in September 2007 - interesting thread btw.

Furthermore, Mutuals have been just as energetic in setting up "specialist lending units" as Banks. The Bank HBOS is particularly vulnerable to its follies with BM Solutions, the Mortgage Business, and its High-Value specilist lending unit. Bradford & Bingley has Mortgage Express and a sizeable chunk of Kensington Mortgage's loan book. Skipton BS has Amber dodgy loans, Britannia has Platform Lending, Portman had Mortgage Works, etc etc. In fact the smaller Mutuals have chased sub-prime just as fervently as the Banks.They are all following the Northern Rock expansion into the lower market model. The worrying thing about WBBS is that they don't have a specialist unit like the others .... in fact they parceled everything up and securitised it....but have had to withdraw from the market...so they are, in fact, quite vulnerable. They are more like Northern Rock than the others although the others have stuffed the liabilities into other companies.

As a Co-op customer, I hope they haven't bitten off more than they can chew.

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Not entirely sure but my first impression is Britannia dividend payments are more likely to be affected than Co-op...though the PR spin is the deal provides opportunities for both sets of customers to increase their dividends.

PIBS are essentially a perpetual fixed income stream guaranteed by the issuer, in this case the Britannia.

Britannia PIBS yield 13% of the nominal issue price (100) so at 131.5 they yield almost 10%.

They are bought and sold in the market.

Since, like Gilts, they pay their dividends gross, they are attractive for inclusion in an ISA or PEP.

The current Britannia PIBS yield, as determined by the market at 10%, is more than twice that of the equivalent Treasury Perpetual Gilts presumably because the perceived risk of them defaulting is that much higher.

How, if at all, might the proposed merger affect this perception of default risk?

Or, is it feared that the Britannia PIBS would be cancelled or bought in somehow when /if the merger happens?

Edited by The Spaniard

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All this bank merging seems wrong to me.

Perhaps they should be split down to component parts. Separate the chaff from the wheat. Not pile it all in together.

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All this bank merging seems wrong to me.

Perhaps they should be split down to component parts. Separate the chaff from the wheat. Not pile it all in together.

This is a merger of mutuals not banks. They have broadly similar assets and a range of complementary business activities. The merger gives the co-op group access to the high street and the Britannia access to stable financial products. The two organisations have a history of working together/cross-promoting each others business.

It's a sensible business merger based on mutual interest - it will interest no-one in the city as there's no quick buck - probably a good sign that it's boring and likely to succeed.

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i've not recieved voting papers if it is going out to co-op members, but will vote no too.

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Does the merger go to a vote of coop members?

Cause I'm voting no Britannia looks like a crock of sh!t

I didn't get a vote on whether NW should take over Portman ... only the Portman members got a vote, I believe. Edit: same with the Derbyshire and Cheshire BS's.

I would guess this is because the members of the 'target' are voting their society out of existence. For the institution doing the taking-over it's just another acquisition.

So I don't expect we'll get to vote (but I'd vote against it too, why bring the assets and liabilities of a sub-prime lender onto the balance sheet?!)

Edited by huw

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Part of Barclays , not sure if the brand name is used anymore

I knew what happened to Woolwich, it was a Hmmmm <_< .

Lok at how many demutualised societies have gone 'tits up':

Bradford & Bingley - floated 4 December 2000 (mortgages nationalised, savings now with Santander)

Birmingham Midshires - taken over by Halifax, April 1999

Northern Rock - floated 1 October 1997 (Yes we know :lol: )

Bristol & West - taken over by Bank of Ireland, 28 July 1997. Bristol and West transferred its branch network and direct savings business to Britannia Building Society on 21 September 2005

Woolwich - floated 7 July 1997, taken over by Barclays Bank in October 2000.

Halifax - floated 2 June 1997 (Well, HBos then Lloyds this week)

Alliance & Leicester - floated 21 April 1997 (now owned by Santander)

National & Provincial - taken over by Abbey National PLC, 5 August 1996 (ceased trading under this name)

Cheltenham & Gloucester - taken over by Lloyds Bank PLC, 1 August 1995

Abbey National - floated 12 July 1989 (now owned by Santander)

There may be more. Its all a bloody disgrace. AS Jim Royle would say, providing for our futures my a**e.

Edited by deflation

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My understanding is that Britannia PIBs will be (or may be) cancelled - replaced with the existing structure of the co-op dividend, which is a completely different beast (roughly speaking, if you contribute 1% of revenue towards the co-op group of businesses, you take home 1% of allocated profit via the dividend scheme).

Co-op dividends are not tradeable assets, so perceived risk shouldn't come in to the equation.

As you supposed, suspect this is the cause of market movements re: Britannia - uncertainty about what will become of the Britannia dividends going forward, and very probably the fact that they will be devalued.

Thanks, Paul.

Yes, the market seems to be pricing in a good chance of cancellation/replacement.

A pity, since a safe tax-free 10% in perpetuity would be tempting. :(

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