Co-operative Bank has agreed to sell itself to Coventry Building Society for £780million, in a deal that will create a £89billion mutually-owned banking, mortgages and savings group.

Coventry chief executive Steve Hughes said that the deal would bring together two complimentary organisations. Co-op Bank would give the mutual a foothold in personal current accounts and business banking, while expanding its presence in mortgages and savings.

Discussions over the terms are still ongoing and if the deal goes through, Hughes said that Co-op Bank would be integrated into the mutual over “several years” to ensure a good outcome for customers. Additionally, £125million of the £780million selling price will be deferred for three years, subject to Co-op Bank’s performance.

“We have a very successful history and we believe that this (deal) could be the basis of a very successful future,” Hughes said. “The Co-op Bank is a financially stable, profitable organisation with a shared heritage and products and services that complement our own.”

The deal to acquire Co-op Bank is the second takeover of a bank by a mutual in as many months. Last month, Nationwide struck a £2.9billion deal to buy challenger bank Virgin Money. Nationwide’s takeover will result in a £420million windfall for Virgin Group founder Sir Richard Branson.