Yorkshire to rise in the east following merger

Yorkshire said merging with its weaker rival will give it a strong presence in the east of England and offer “a real alternative to the plc profit-driven model of Britain’s banks”.

The merger, which will need approval from members of N&P, will create a society with 224 branches, three million customers and assets of about £34bn.

“It’s a really good opportunity to strengthen our presence in the east of England which is a prosperous and growing economic region and where the Yorkshire is not well represented,” said Yorkshire chief executive Iain Cornish.

“We will be a credible force on the high street. We’ve got financial muscle where we need financial muscle but we’re not going to lose the individual, personal touch.”

N&P was forced to merge after a three-year mis-selling scandal. It was fined £1.4m on Monday by the Financial Services Authority for failings over its Keydata life settlement products and was told to set aside £51m to pay back customers.

The FSA found N&P failed to properly assess the circumstances of many of its customers, meaning some were sold unsuitable high-risk products.

Its Keydata subsidiary was put into administration in June 2009, but a £57m provision to cover the mis-selling scandal forced N&P to a £48.9m loss in 2010.

Mr Cornish, who is standing down from Yorkshire later this year, said it is a good deal despite the Keydata saga.

“We understand exactly what the issues are,” he said. “We have factored in all the costs and implications into our thinking.

“They have got these issues but I think their members can distinguish between the Keydata issues and the good, solid and traditional building society activities and still think highly of N&P as a business.”

Yorkshire rescued Barnsley and Chelsea building societies in 2008 and 2010 respectively. Mr Cornish told members at yesterday’s AGM in Bradford that integration of Chelsea was ahead of expectations with its balance sheet shrunk. The enlarged group will be called Yorkshire Building Society, maintaining its head office in Bradford and keeping the N&P brand. It will employ about 3,700 staff.

Mr Cornish said it will make savings at N&P’s head office in Peterborough, which employs 375 staff, adding this will mean an unspecified number of job losses.

He also raised the possibility of winding down the smaller mutual’s “non-core activities” if a review shows they do not provide value or are not prudent.

However, there is little overlap between the two branch networks. Mr Cornish said he wants to invest in N&P’s branch network and pledged to keep all of its 46 branches open for at least two years.

Yorkshire said the merger, due to be completed by November 1, “provides a compelling opportunity to grow and strengthen the long-term position of the enlarged society”. It added the society will be better placed to compete and members will gain access to better value products.

N&P members with mortgages tied to the mutual’s standard variable rate of 5.35 per cent will benefit from being moved onto Yorkshire’s 4.99 SVR.

Mr Cornish added the hunt for his replacement is going well and it will take a “few more weeks” to whittle down the selection.

Ed Anderson, the chairman, led the praise of Mr Cornish at the AGM and also defended the work and pay of the mutual’s non-executive directors, but he did not specify their time commitment.

Yorkshire was advised by Lexicon Partners and Allen & Overy. N&P was advised by Fenchurch and Addleshaw Goddard.

Sector may see more consolidation

THE mutual sector faces more mergers or acquisitions as Britain’s economic recovery falters, according to Iain Cornish.

He said the upturn would be “slow and patchy” and forecast a modest fall in house prices.

“In the short-term, we don’t see any major change in the current environment of relatively high inflation, low interest rates, elevated unemployment and flat mortgage and savings markets.”

Further consolidation among building societies “seems likely for as long as market conditions remain difficult”, he added.