11th Nov 2014 09:17
LONDON (Alliance News) - Capita PLC Tuesday said it has been made preferred bidder on a deal potentially worth up to GBP325 million over 10 years to run the Co-operative Bank's mortgage servicing operation in the UK, a deal that marks a big new step into taking over mortgage servicing by the outsourcing giant.
The deal needs to be approved by the bank's board and regulators, but Capita is expecting the deal to start in the first quarter of 2015.
Under the terms of the deal, Capita would take over and transform The Co-operative Bank's mortgage servicing operations in Leek in Staffordshire and Plymouth. It pledged to install new systems to drive efficiency and to simplify business processes while sticking to regulatory requirements. Capita would also acquire the about 660 staff and assets of the bank's mortgage administration business Western Mortgage Services Ltd.
The contract would cover the bank's more than 250,000 mortgage customers and GBP23 billion of lending.
"Retail banking is facing unprecedented business and regulatory challenges and Capita is therefore
focusing strongly on developing capacity to support this market," Capita Chief Executive Andy Parker said.
"Capita's ambition is to draw on its business process and customer service transformation expertise to become the leading end-to-end mortgage processing partner delivering real value to financial services clients," he added,
Capita is trying to move into the sector just as banks look to cut costs in an attempt to meet new regulatory rules requiring them to have bolstered balance sheets. However, it also comes at a time when there is increased regulatory scrutiny of any firms operating in the financial services sector.
Capita recently acquired Crown Mortgage Management, renaming it Capita Mortgage Services.
Co-operative Bank got into difficulties in the last couple of years, as it was criticised for its corporate governance in the wake of a failure to buy assets from Lloyds Banking Group, a deal that collapsed when Co-operative realised it couldn't afford the deal.
"Our aim is to become a more efficient bank that is better placed to serve our individual and
SME customers, with values and ethics at the heart of everything we do. Developing our core retail mortgage business is a key part of this strategy," The Co-operative Bank Chief Executive Niall Booker said in a statement.
"It is vital we improve our processes, consolidate and utilise up to date mortgage systems and, as a smaller bank, ensure we can respond nimbly in a competitive market, mindful of the impact of increased regulation to our cost base," he added.
Capita shares were up 0.8% at 1,120.00 pence early Tuesday.
By Steve McGrath; [email protected]; @stevemcgrath1
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