Nationwide to merge with two smaller building societies

Permalink: Nationwide to merge with two smaller building societies
by Lin Freestone

Nationwide, the UK’s largest building society, is in advanced discussions concerning its potential merger with two smaller rivals, the Derbyshire Building Society and Cheshire Building Society.

With the approval of the FSA, the Nationwide is to step in to support the two smaller lenders, which are under growing pressure due to the credit crunch.

The Derbyshire Building Society has 500,000 members, and 50 branches across the Midlands, the North East and Yorkshire. Its total assets are worth more than £7bn.

The Cheshire Building Society has approximately 400,000 members, and operates 60 building society and estate agency branches, with assets of just under £5bn.

Under the terms of the mergers, Nationwide’s £179bn of assets and 900-strong branch network will absorb the two smaller building societies. As they will retain both their branding and their high-street networks, minimal upheaval will be faced by members. It is anticipated that any job losses would be confined to the head offices of the two firms.

The approaches made by the smaller societies were made to pre-empt problems caused by any further deterioration in the economy, and not because either organisation was in immediate danger. Both societies have seen their profits fall in the face of tough conditions in housing and credit markets.

Building societies are particularly vulnerable in times of economic decline because they rely on savings income and do not have access to the equity funding available to banks.