Mergers ‘do not mean a weakening mutual sector’

Yorkshire Building Society last week confirmed it is in talks about merging with its smaller rival Norwich and Peterborough.

That would bolster YBS’s position as the UK’s second-biggest building society, giving it assets of about £35bn.

A spokeswoman for the Building Societies’ Association (BSA) yesterday said: “We do not regard mergers as weakening the sector.

“Brands have been retained in the past. What’s important is that we have a strong building society sector.”

YBS has 2.6 million members, 178 branches and assets of more than £30bn.

Merging with N&P would give it a strong presence in the East of England. There is little geographical overlap between N&P and the Bradford-based lender, and a merger would give YBS 46 new branches.

N&P has assets of just over £4bn, employing about 1,000 people.

YBS has already merged with Chelsea and Barnsley building societies in recent years, and an industry expert said this experience will give the lender confidence it can successfully pull off a deal with N&P.

“They would not have got this far if they did not think it was appropriate,” said the source.

“They’ve got a track record of having successfully completed the Chelsea merger and Barnsley before that.

“N&P is about nine times smaller than Yorkshire.

“It gives them the benefit of economies of scale – if you’re a big player raising money on the money markets, that’s going to be beneficial to you.”

N&P is due to report its 2010 results this week, and any tie-up between the two lenders is not expected to be sealed for a few weeks.

“The society has demonstrated resilience throughout the recession and has maintained one of the strongest financial positions of any major UK lender, while continuing to deliver value and financial security to its members,” said YBS in a statement. “During this period it has shown its ability to successfully carry out large and complex mergers.”