Building society's profits fall ahead of takeover

Coventry Building Society's profits have plunged as it gears up for a multimillion-pound takeover of The Co-operative Bank.

Pre-tax profits for the first half of the year fell to £159m, down from £269m during the same period in 2023.

The building society blamed the lasting effects of an "exceptional operating environment" in 2023.

It comes as the impact of higher borrowing costs begins to wear off for the UK's high street banks, which had been benefiting from charging more for loans.

Coventry is expecting to complete a £780m deal to buy The Co-operative Bank in the first quarter of 2025.

Combined, they will have millions of customers and about £89bn worth of assets.

During the first half of this year, Coventry's mortgage balances grew by 2.2% to £51.4bn and savings balances grew by 2.6% to £48.8bn.

But net interest margin rates fell to 1.05%, down from 1.34% over the same period last year.

This reflects the difference between the interest rates that a bank or building society pays and what it receives, and it is seen as one way to measure profitability.

Chief Executive Steve Hughes said the building society had "grown mortgages and savings in a market where economic uncertainty persists".

He added that Coventry had "recorded a strong financial performance in the first half of 2024" and was "making good progress to complete the acquisition of The Co-operative Bank".

The combined organisation is due be led by Mr Hughes and Coventry's chair David Thorburn.

It means The Co-operative Bank will return to a mutual structure, meaning that it is owned by individual members rather than shareholders and investors like most UK banks.

It was part of the wider Co-op Group more than 10 years ago, before splitting off when it fell into deep financial difficulty.

Co-operative Bank has already said its customers would "not see any immediate changes as we continue to operate separately" until the integration is complete.