Co-op Bank head says rising interest rates could trigger a wave of mergers involving smaller banks – and admits his own company could become a target
Objective: the cooperative has quadrupled its profits
The head of the Co-operative Bank said rising interest rates could trigger a wave of mergers involving smaller banks – and admitted his own business could become a target.
Nick Slape said rising rates, which tend to boost lenders’ profits as they charge borrowers more, could be a “catalyst” for consolidation.
Slape said there was “nothing to see” right now of the co-op becoming a target. But he added: “It goes with progress. If the bank is progressing and performance is better, someone might want to watch us.
He said he was “unaware” of any potential suitors who were valuing his business.
Slape was speaking after the bank reported more than quadrupling its profit in 2022 to £132.6million, from £31.1million a year earlier.
This marks a major turnaround for the lender, which was on the verge of bankruptcy before being rescued by a group of US hedge funds in 2017. “For the past few years people have been talking about consolidation in the midstream. He didn’t come,” Slape said. But the rapid rise in interest rates from 0.1% to 4% “could be a catalyst for this stuff,” he added.
“I haven’t seen anything yet,” he continued. “We’re going to look at things and pass the rule over it, do the math like everyone else does, but we’re not involved in any conversations.”
In 2020, the cooperative reportedly received a takeover approach from US private equity firm Cerberus – but talks came to nothing.
A year later, its own offer to buy rival TSB for £1 billion was rejected by TSB’s Spanish owner Sabadell.
Then last month it was reported that the Co-op Bank had submitted a bid for a portfolio of £650m loans being offloaded by rival Sainsbury’s Bank. The cooperative did not comment on this report.
Some banks have been criticized for being “ungenerous” with the interest they offer to savers, as they rapidly raise borrowing rates in response to moves by the Bank of England. But Slape defended his company’s case, saying it passed on higher rates to all customers, including those on accounts that are no longer available to new savers.
