Leading UK Mortgage Lenders Might Merge Soon

Two largest British building societies – Yorkshire, which takes the 2nd position in the UK and Chelsea, which takes the 5th place, recently announced that they are currently holding negotiations about possible merger. Should the deal be agreed, a powerful financial organisation specialising in mortgage lending and savings accounts will be created and will definitely rival Nationwide – the leading player on the UK scene of building societies. Currently, Yorkshire building society has 143 branches across the United Kingdom and 2 million members, while Chelsea’s network, which is significantly smaller, counts 35 branches and 700,000 members. According to Stuart Bernau, chairman of the Chelsea building society, the organisation has been reviewing its activities, structure and financial performance lately and concluded that a merger with Yorkshire building society will only bring about benefits to shareholders and members of Chelsea. Mr. Bernau even said that the potential merger might be considered a “rescue deal” for Chelsea by some. Let us remind that last year the building society posted a record loss of £39 million, and was later obliged to write off £44 million in investments in 2 failed banks and a further £15 million in investments in a mortgage brokerage firm that went bankrupt. The process of merging between 2 building societies is not easy, though. First and foremost, boards of directors of both, Chelsea and Yorkshire, have to agree that merger is beneficial to each society. Furthermore, members of both societies and the Financial Services Authority will need to approve the merger. The potential merger of Yorkshire and Chelsea does not come as a surprise, as a number of merging processes, designed to rescue businesses, took place in the UK banking sector since the economic downturn. As such, in September 2008 Cheshire and the Derbyshire building societies were taken over by Nationwide in a rescue move. Meanwhile, Barnsley building society was taken over by Yorkshire and Scarborough – by Skipton.