Nationwide in talks over mergers

Posted by admin on 7 September, 2008 under Business news, Credit crunch | Be the First to Comment

The Nationwide Building Society is in talks to merge with two of its smaller rivals, the Derbyshire and Cheshire Building Societies.

The Nationwide, the UK’s biggest mutual lender with 14 million members, is to step in to support the two firms with the approval of financial regulators.

Smaller lenders are under growing pressure due to the credit crunch.

The BBC’s Business Editor Robert Peston said members of the two smaller firms would not get any windfall payments.

Tough climate

Nationwide confirmed that it was in “advanced discussions” with the Derbyshire and Cheshire organisations about separate mergers.

The Derbyshire is the larger of the two, with 500,000 members, 50 branches across the Midlands, the North East and Yorkshire and total assets worth more than £7bn.

“The City watchdog, the FSA, wants them under the stewardship of the more robust Nationwide” BBC Business Editor Robert Peston

The Cheshire has about 400,000 members, operating 60 building society and estate agency branches.

It has assets of just under £5bn.

Both societies saw their profits fall last year, to £8.7m and £8.1m respectively, amid tough conditions in housing and credit markets.

Like all lenders, building societies have cut the amount of loans on offer and raised rates in response to the credit squeeze, although both Derbyshire and Cheshire insist they have strong mortgage books.

However, the negative publicity surrounding the near-collapse of Northern Rock has affected smaller banks and mutual lenders more.

When the Nationwide merged with the Portman last year, the latter’s members pocketed windfall sums of between £200 and £1,000.

But our correspondent said the sharp decline in the housing market ruled out the possibility of windfall payments in this instance.

News reported by The BBC