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Nationwide to absorb The Debyshire and Cheshire Building Societies
Nationwide, the UK's biggest customer-owned lender, said today it was to merge with smaller rivals the Derbyshire and Cheshire Building Societies.
Nationwide, the country's second-biggest provider of mortgages, said the tie-ups would create a mutually owned group with assets of £191 billion and £122 billion in retail deposits.
The mergers will be completed without a vote by the three societies' members, and Derbyshire and Cheshire customers will not receive a payout, Nationwide said. The move further reduces the number of competitors in the commercial mortgage market, where The Derbyshire with it's SALT brand had been making a play, and the Cheshire has historically been a supplier to the market, although it's appetite was reduced after a big fraud on it.
Graham Picken, Derbyshire chief executive, is thought to have approached Nationwide in the summer. The Derbyshire is believed to have been concerned about the quality of some assets held in the society's treasury after it bought books of commercial and sub-prime loans from providers GMAC and Kensington in the past few years.
Mr Picken is likely to have been concerned about the potential for losses if economic conditions in the UK continue to deteriorate.
The Derbyshire's pre-tax profits fell by almost 60% last year to £9.6 million after it took a £4.5 million charge to increase its provision for bad debts. The building society, which has 50 branches, withdrew from the sub-prime market this year.
Karen McCormick, Cheshire's chief executive, is believed to have made a more recent approach to Nationwide. She is not thought to be concerned about the Macclesfield-based society's assets, but about how well the Cheshire, which has 45 branches and 13 estate agency outlets, will trade if the market continues to worsen.
Nationwide, which took over the Portman Building Society last year, has benefited from the so-called flight to quality that occurred after the collapse of Northern Rock. Nationwide took £1 in every £5 saved in the financial year to April 2008, opening 1.5 million new savings accounts.
Savings fund 71% of Nationwide's business, which means that it is less reliant on borrowing from the wholesale market. The society has pulled back from the mortgage market in the past financial year, cutting its share of new mortgages from 11% to 7% as it focused on higher-quality lending.
It took a £726 million hit on the value of its £25.5 billion worth of treasury assets in 2007 as a result of the credit crunch, but the loss will not crystallise because it will hold the assets to maturity. It also booked an actual loss of £102 million on its investments in structured investment vehicles.
Nationwide, the country's second-biggest provider of mortgages, said the tie-ups would create a mutually owned group with assets of £191 billion and £122 billion in retail deposits.
The mergers will be completed without a vote by the three societies' members, and Derbyshire and Cheshire customers will not receive a payout, Nationwide said. The move further reduces the number of competitors in the commercial mortgage market, where The Derbyshire with it's SALT brand had been making a play, and the Cheshire has historically been a supplier to the market, although it's appetite was reduced after a big fraud on it.
Graham Picken, Derbyshire chief executive, is thought to have approached Nationwide in the summer. The Derbyshire is believed to have been concerned about the quality of some assets held in the society's treasury after it bought books of commercial and sub-prime loans from providers GMAC and Kensington in the past few years.
Mr Picken is likely to have been concerned about the potential for losses if economic conditions in the UK continue to deteriorate.
The Derbyshire's pre-tax profits fell by almost 60% last year to £9.6 million after it took a £4.5 million charge to increase its provision for bad debts. The building society, which has 50 branches, withdrew from the sub-prime market this year.
Karen McCormick, Cheshire's chief executive, is believed to have made a more recent approach to Nationwide. She is not thought to be concerned about the Macclesfield-based society's assets, but about how well the Cheshire, which has 45 branches and 13 estate agency outlets, will trade if the market continues to worsen.
Nationwide, which took over the Portman Building Society last year, has benefited from the so-called flight to quality that occurred after the collapse of Northern Rock. Nationwide took £1 in every £5 saved in the financial year to April 2008, opening 1.5 million new savings accounts.
Savings fund 71% of Nationwide's business, which means that it is less reliant on borrowing from the wholesale market. The society has pulled back from the mortgage market in the past financial year, cutting its share of new mortgages from 11% to 7% as it focused on higher-quality lending.
It took a £726 million hit on the value of its £25.5 billion worth of treasury assets in 2007 as a result of the credit crunch, but the loss will not crystallise because it will hold the assets to maturity. It also booked an actual loss of £102 million on its investments in structured investment vehicles.
Mon, 8th Sep 2008