Earlier this year, Portman said it was looking into possible mergers and acquisitions and Lambeth represents the first manifestation of this policy.
The deal will go ahead on 30 September, subject to the approval of Lambeth members and the Financial Services Authority (FSA).
Robert Sharpe, chief executive of Portman, believed an impetus for societies to merge helped drive the deal. He said: “While there is no doubt that small and medium-sized building societies are able to trade profitably, we all operate in an increasingly challenging market environment. The growing costs of regulation, the requirements of Basel II and the expenditure needed to invest in ever more sophisticated technology together make a compelling case for this merger.
Chris Radford, chief executive of Lambeth, said: “This is an exciting and important decision for Lambeth Building Society. We believe that the proposed merger with Portman Building Society can only increase our competitiveness in the market and allow our members to benefit from market-leading products and services.”
No compulsory redundancies are expected, but Lambeth’s head offices in London and two branches, in Bromley and Woking, will be closed and staff offered transfers to other branches and Portman’s offices in Bournemouth and Wolverhampton.
However, Neil Johnson, PR and policy manager at the Building Societies Association (BSA), doesn’t believe there is a pressing need for societies to merge at this time.
“Consolidation happens from time to time and it’s just one of those things. I don’t know if there’s a need for further mergers but societies are operating under decreasing margins and are adapting their economies of scale. One way to cope with this is to get bigger.”
