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Dim sum and a [pounds sterling]70 billion supermutual for afters HOW THE BRITANNIA AND CO-OP MERGER PLAN WAS HATCHED IN A CHINESE RESTAURANT

0 Comments | Mail on Sunday (London, England), The, March 1, 2009

Byline: The Interview BY JEFF PRESTRIDGE

FOR regulars in the popular Chinese restaurant it was just another Wednesday night enjoying good food, decent wine and excellent company.

But barely noticed in the corner of the Cinn Oriental in Wilmslow, Cheshire, were two casually dressed, unobtru- sive middle- aged diners eating sive middle-aged diners eating chicken teriyaki and dim sum who between mouthfuls were secretly plotting a groundbreaking financial deal that would send reverberations through the country’s mutual sectors.

The result of that dinner conversation, which took place last July, should come to a climax late next month when one of the diners, Neville Richardson, gets the goahead from his customers to merge his Britannia building society into the mighty Co-operative, creating the first UK merger of mutuals from different sectors.

The [pounds sterling]70 billion ‘supermutual’ business that will emerge from the marriage of the Britannia and Co-op’s financial arm will be led by Richardson, 51. David Anderson, 54, the current chief executive of Co-operative Financial Services and Richardson’s dining companion that summer’s night, will stand aside.

Richardson says that ‘nothing, absolutely nothing’ will distract him in his mission to make mutual history. Not even rumblings of discontent among a minority of Britannia’s three million customers over the hastiness of the deal, the society’s poorish 2008 results, announced last Thursday – profits slumping from [pounds sterling]69.3 million to [pounds sterling]5.4 million – and concerns over redundancies will dissuade him from the path he has chosen.

Indeed, he positively bristles when I use the word ‘poor’ to describe Britannia’s results. ‘Well our figures are [pounds sterling]24 billion better than Royal Bank of Scotland’s,’ he brusquely responds, referring to the announcement made the same morning as Britannia’s results that RBS made 2008 losses of [pounds sterling]24.1 billion.

‘And remember, our profits are reduced by the fact that we will be handing out [pounds sterling]19 million of bonuses to customers to reward them for their loyalty to us,’ he says.

Profits were also reduced by [pounds sterling]58 million of losses on loans and [pounds sterling]57 million of exposure to failed American bank Lehman. As for the [pounds sterling]19 million of membership rewards, it is a fraction of payments made in previous years.

‘Look, whichever way you look at it, the merger has to make great sense,’ he says sitting in the Longton room at Britannia’s sprawling – and rather ugly – headquarters in Leek, Staffordshire, looking dapper and relaxed as befits a man who last year received total remuneration of [pounds sterling]489,000 (an 11 per cent increase on 2007).

Like many of the meeting rooms at Britannia’s main offices, the Longton gets its name from one of the 60-odd building societies that Britannia has absorbed along the way in its 153-year history.

‘The two businesses that will come together have different strengths,’ he argues. ‘Like most building societies, Britannia is strong in mortgages and savings but we don’t offer a current account. Co-op fills this void.

‘Similarly, our internet offering is also weak while Co-op has the successful Smile brand. On general insurance and personal loans and credit cards, we only offer these products through arrangements with Legal & General and HBoS. Again, Co-op is strong in these areas
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