The Nationwide said that these are prudent and pre-emptive actions taken independently by the Boards of The Derbyshire and The Cheshire following the identification of financial issues faced by both Societies. The transactions represent an important step in maintaining a strong mutual sector in the UK, with Nationwide's pre-eminent position and financial strength providing a solid foundation for the future.
Both The Derbyshire and The Cheshire separately and independently approached Nationwide as a prudent measure to ensure the financial strength and stability of each Society. The Derbyshire and The Cheshire's have in the region of 925,000 members and the transaction will create a society with assets totalling more than £191 billion and £122 billion of retail deposits.
The Derbyshire has assets of £7.1 billion, 50 branches and 485,000 members. It expects to report an unaudited pre tax loss of £17 million for the half year to 30 June 2008 arising predominantly in its near-prime, sub-prime and commercial loan portfolios. These represent material financial uncertainties for The Derbyshire particularly in the current economic climate
The Cheshire has assets of £4.9 billion, 45 branches and over 440,000* members. It expects to incur an unaudited pre-tax loss of £10.5 million for the half year to 30 June 2008 due to an exceptional £11.5 million impairment charge on a single secured commercial loan.
In order to preserve capital within the enlarged Nationwide for the benefit of its combined membership there will be no distribution to The Derbyshire or The Cheshire members, and they will both retain their brands and branch networks.
Commenting on the mergers, Graham Beale, Nationwide's chief executive, said: "The Derbyshire and The Cheshire have independently concluded that a merger with Nationwide is in the best interests of their savers and borrowers given the financial issues faced by both societies. The core member businesses of both societies are in good shape and have a better future as part of a larger organisation. Nationwide is in a unique position because of its size and financial strength to provide support, and we regard it as both responsible and commercially beneficial to undertake these mergers.
The mergers will further enhance Nationwide's position as the leading UK building society. Nationwide remains committed to mutuality and recognises that these transactions play their part in maintaining a modern and healthy mutual sector in the UK. We look forward to welcoming The Derbyshire and The Cheshire members to Nationwide as part of the UK's largest building society".
It is hoped the transactions will be complete by December of this year.
