The Co-operative Bank has selected Capita as the preferred bidder to "transform" its mortgage servicing operation in the UK.
The deal is worth up to £325 million over 10 years and is anticipated to start in the first quarter of 2015. Under the terms of the deal, covering 250,000 mortgage customers and £23 billion of lending, Capita will take over and transform the Co-operative Bank's mortgage servicing operations in Leek, Staffordshire and Plymouth.
Outsourcing the major transformation work to Capita is perhaps not surprising, considering both the bank's CIO and the Co-op group CIO have left the troubled company in recent months.
Capita will install new systems designed to drive efficiency, while simplifying business processes in a regulated environment to improve the experience of the Co-operative Bank's customers and support business growth, said the bank.
As part of the deal, the Co-operative Bank will transfer around 660 people, technology systems and capabilities to Capita, predominantly in Leek and Plymouth. This includes transferring the capabilities of Western Mortgage Services Limited, the Co-operative Bank's mortgage administration business, to Capita.
Niall Booker, chief executive at the Co-operative Bank, said: "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."
Booker said: "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.
"These proposals to partner with Capita would support our plans for growth in retail mortgages and would enable us to continue to deliver high standards of service to our customers and brokers."
New business analytics systems will play a big part in improving the performance of the bank's mortgage business, said Capita. Capita will be supported by Unisys and Vertex Financial Services in supporting the Co-op contract, who will provide servicing and mortgage origination platforms respectively.
The deal and acquisition is subject to final terms, the approval of the bank's board, and regulatory approval. Staff affected are also being consulted.