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| Building societies agree merger | |
| (30 minutes later) | |
| The Yorkshire and Chelsea building societies have announced plans to merge and create the UK's second largest building society. | The Yorkshire and Chelsea building societies have announced plans to merge and create the UK's second largest building society. |
| The Yorkshire is currently the second largest building society in the UK, Chelsea is the fifth largest. | The Yorkshire is currently the second largest building society in the UK, Chelsea is the fifth largest. |
| The deal would create a society with 2.7 million members, a network of 178 branches and have assets of £35bn. | The deal would create a society with 2.7 million members, a network of 178 branches and have assets of £35bn. |
| The merger still needs to be agreed by the societies' members, who will receive no windfall from a deal. | |
| The merger is aimed to be in place by April next year. | |
| The two societies would retain their brand names under the proposals, but the enlarged society would be called the Yorkshire Building Society. | The two societies would retain their brand names under the proposals, but the enlarged society would be called the Yorkshire Building Society. |
| Coverage | |
| The new, larger society would have a wider geographical spread of branches across England, with the societies promising that branches would remain everywhere where they currently have a presence. | |
| They said that no public money was involved in the deal, which was based on a business decision. | |
| But Iain Cornish, chief executive of the Yorkshire, said that there would be no windfall for members because economic conditions were tougher than at the time of previous building society deals. | |
| He said they were concentrating on making savings, and so members would not expect a windfall. | |
| The merger is likely to be interpreted 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 reported a loss of £39m, the largest recorded by a building society. It had to write off £44m, which was the bulk of its investments in two failed Icelandic banks. | |
| Chelsea also wrote off a further £15m after buying a mortgage broker in 2007 whose business subsequently collapsed in the credit crunch. | |
| Unlike banks and other stock-market quoted companies, building societies, which are owned by their members, have a limited ability to replenish their reserves if they are drained by losses. | |
| Changing sector | |
| Since the autumn of 2008 there has been a flurry of takeovers of small building societies to rescue them from problems brought on by the financial crisis. | |
| In September last year, the 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. | |
| One of the UK's largest and strongest building societies, the Britannia, has merged with the Co-op bank. | |
| In March this year, the Dunfermline building society collapsed, to be taken over by the Nationwide. | |
| This was swiftly followed in June by emergency action by the authorities to ensure that the loss-making West Bromwich could stay afloat. |