Co-operative Financial Services (CFS) and building society
Britannia could use technology to help them win business from
struggling competitors.
The firms have
agreed to merge in a move that will create a company that can
harness the latest technology to take on the big banks.
The combination of disenchantment with the big banks and the
addition of large number of branches gives the firm an opportunity
to win customers.
The technology CFS uses can help Britannia, while the additional
branch coverage of Britannia can help CFS, said Bob McDowall,
analyst at Towergroup.
"They must ensure that the technology that CFS has is integrated
into the Britannia branch network," added McDowall.
With the major banks cutting costs and being hit hardest by the
market turmoil there is an opportunity for smaller banks to move up
the UK banking hierarchy. McDowall said while other banks hold back
discretionary spending, this merged group, which has not been
impacted by the credit crunch to the same extent as some major
banks, can invest in new customer-facing technology.
"This is an opportunity to make changes in technology use to win
business rather than cut costs," said McDowall. "There is an
opportunity because people are nervous about working with some of
the other major banks."
"I do not think they will have to invest in leading-edge
technology, but rather add some features at the front end and
benefit from the bigger branch network and customer
disenchantment."
The coming together of the country's second biggest building
society and CFS with its corporate banking, insurance and
investment banking expertise will also save £60m in costs by the
third year of the merger.
The merged bank is already billing itself up as a "super-mutual"
offering itself as an alternative to shareholder- and
government-owned banks. The combined business will have £70bn of
assets, nine million customers, more than 12,000 employees and more
than 300 branches.
CFS and Britannia have avoided the impact of the credit crunch
because Britannia is a mutual and CFS is an ethical bank, which
takes fewer risks.
Britannia said the talks were not taking place as a result of
the economic turmoil, when the talks were first revealed. Britannia
CEO Neville Richardson said unlike government brokered takeovers
such as Lloyds TSB's acquisition of HBOS, or Santander's takeover
of Bradford & Bingley, the companies do not need to merge.