UK's third largest mutual Coventry Building Society is reportedly pursuing talks with its smaller rival Stroud & Swindon over a potential merger. Talks began many weeks back and the possible merger is expected to be announced in the coming few weeks.

It may be noted here that many building societies have merged in the recent past to offset the pressure of the credit crunch. Recently, country's fourth-largest mutual Skipton became bigger by swallowing country's oldest building society Chesham.

Building societies in the UK have limited ways to raise capital in times of credit crunch as these societies are owned by their savers rather than shareholders.

Most of the UK's societies have been facing decline in profits because of the Bank of England's decision to keep key interest rates at their record low of 0.5 per cent.

Stroud, which has as many as 265,000 members, suffered a loss of 3.4 million pounds in 2008 as low interest rates corroded its margins. The combined entity will have assets worth around 25 billion pounds.