Nationwide announces rescue deal for Cheshire Building Society

BOTH Cheshire and Derbyshire building societies could soon be under new ownership if a move made by The Nationwide goes ahead.

The deal, if successful, would reinforce The Nationwide’s position as the UK’s leading building society and secure the financial futures of Cheshire and Derbyshire, which have both been hit by the market slowdown.

Established in 1870, The Chesire has assets of £4.9bn, 45 branches, 800 staff and more than 440,000 members. It expects to incur a pre-tax loss of £10.5m for half year to June 30 due to an exceptional £11.5m impairment charge on a single secured commercial loan.

Earlier this year the society, which is headed by chief executive Karen McCormick, was forced to close Manchester city branches as well as outlets in Hazel Grove, Buxton and Queensferry, Merseyside.

The Derbyshire, which is the UK’s ninth largest building society, has assets of £7.1bn, 50 branches and 485,000 members.

It also is expecting heavy losses as a result of its near-prime, sub-prime and commercial loan portfolios.

Nationwide however was keen to promote its financial stability. The building society has £179bn of assets, around 900 branches and all of its ratios predicted to increase during the current financial year.

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.

He added: “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.”

Nationwide said as part of the enlarged organisation, The Derbyshire and The Cheshire members would benefit from the security provided by Nationwide’s scale and financial strength.

The Derbyshire and The Cheshire brands and branch networks will be retained. Nationwide also intends to develop these businesses further and ensure that both franchises continue to serve the needs of their respective local communities.

It is not expected that the proposed tie-ups – planned for conclusion by the end of the year – will result in windfall payments.

The announcement comes a day after the US government seized control of troubled mortgage companies Fannie Mae and Freddie Mac in an effort to support the American housing market and ward off more global financial market turbulence.

Fannie Mae and Freddie Mac own or guarantee almost half of the country’s $12 trillion in outstanding home mortgage debt.

Markets have rallied as a result of the bail out.