Advanced talks for merger held

Dec 2 2009 by Iain Laing, The Journal

THE Yorkshire and Chelsea building societies say they are in “advanced talks” about a possible merger to create a second, huge, mutually-owned mortgage and savings business to rival Nationwide.

The UK’s second biggest building society, the Yorkshire, is in negotiations with the fifth biggest, which in August posted a half-year loss of £26m after setting aside £41m to cover fraud.

The Chelsea said: “The board of Chelsea has been undertaking a detailed review of the society’s activities, operations, financial position and corporate structure. As part of this, Chelsea has considered the potential benefits to members and other stakeholders of a merger and this has culminated in discussions with the Yorkshire.”

The Yorkshire has two million members and 143 branches, while Chelsea has 35 branches and 700,000 members. And a merger is likely to be viewed as a rescue deal for Chelsea, whose new chairman Stuart Bernau, has been reviewing the future of the business and whether it can stay independent.

In 2008 it posted a loss of £39m, the largest recorded by a building society and had to write off £44m, which was the bulk of its investments in two failed Icelandic banks.

It wrote off another £15m after buying a mortgage broker in 2007 whose business later collapsed. The businesses said it was too early to say if a merger would result in a windfall for the members of either of the two societies.

A deal would be the latest move in the consolidation of the industry. In September last year, Nationwide agreed to stage a rescue takeover of both the Cheshire and the Derbyshire.

The Yorkshire then took over the Barnsley Building Society, while the Skipton took over the Scarborough.

The Britannia, has merged with the Co-op bank and, in March this year, the Dunfermline building society collapsed, to be taken over by Nationwide.

In June emergency action by the authorities ensured that the loss-making West Bromwich could stay afloat.