Big Bang for two building societies

What will N&P's merger with Abbey National mean for customers?
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The Independent Online
The busy bee has buzzed its last. As the merger of National & Provincial with Abbey National takes effect tomorrow, the building society's familiar logo will disappear from the streets.

Although all N&P branches - and cash machines - are closed to customers until Monday morning, an army of more than 1,200 people is working round the clock to make the merger happen: installing new computer systems and replacing the busy bee with Abbey's familiar red umbrella.

It is the first time a "Big Bang" of this kind has been attempted. The previous big building society merger, of the Leeds and Halifax, involved an overnight change of corporate identity, but consolidation of accounts and systems has been phased over almost a year.

When N&P branches closed their doors at 5pm last night, staff had two hours in which to balance their accounts before the computer network shut down. Engineers started arriving soon afterwards, installing new PCs and printers which are being linked to the Abbey network over the weekend.

Meanwhile gangs of contractors are visiting every branch to install new signs: in many cases the new name-boards are already in place, hidden by temporary N&P signs which can quickly be pulled down.

About 100 N&P and 10 Abbey branches have closed, with accounts transferring to another office nearby. No staff are being made redundant as a result of the merger, since both organisations have freezed recruitment since last year's annoucement of the link-up.

The marriage, which involves the transfer of assets worth pounds 13bn, has taken 55 weeks to consummate. But the climax, so far as most N&P customers are concerned, is still a few weeks away: the payout, worth at least pounds 500 in shares or cash, does not come until the end of the month.

Some long-serving N&P staff and loyal customers are dismayed at the end of the society's independence, and the switch from membership of a mutual to being customers and shareholders of a plc. But they can find some reassurance in the fact that Abbey's roots and culture have grown from the same soil: the 19th century building society movement.

The early building societies were exactly what the name suggests: groups of local people who clubbed together to raise money for building homes of their own. N&P traces its origins back to the Bradford Third Equitable Benefit Building Society, founded in 1864, and incorporates half a dozen other societies dating back to the same period.

Abbey National was created in 1944 by the merger of the Abbey Road and National building societies. Established in 1849, the National's chief object, according to the first prospectus, was to qualify members to vote at elections, which at the time required ownership of freehold land worth 40 shillings a year.

Today about 45 per cent of Abbey's shares are held by private investors, rather than institutions, and this proportion will increase to almost 50 per cent following the merger. The scale of this shareholding, unique among financial institutions in the UK, results from the decision taken in 1989, when Abbey converted from a building society to a bank and floated on the Stock Exchange, to offer shares to members only, and not to corporate investors.

There's comfort also to be drawn from Abbey's financial performance. At the time of conversion, members received 100 free shares, worth pounds 130 at the time. Today those shares are worth more than pounds 560, and dividend payments to date have been worth another pounds 100-plus.

Some N&P savers will benefit from better interest rates than those currently offered by the society. On Tessa accounts, for example, Abbey offers higher rates than N&P for amounts over pounds 8,400.

Those with mortgages over pounds 60,000 will pay a slightly lower rates: while N&P's standard variable rate was 7.04 per cent, Abbey charges 6.99 per cent for mortgages from pounds 60,000 to pounds 99,999 and 6.94 per cent over pounds 100,000.

Abbey's personal loans are cheaper - a full percentage point less than the N&P rate for loans over pounds 5,000. Visa card holders will see their monthly interest rate cut from 1.63 per cent to 1.52 per cent, or 1.38 per cent for balances over pounds 1,000.

The other group to benefit will be N&P customers with Max or Instant Access accounts. In place of their existing ATM card they have new Electron cards which can be used as debit cards for payment in shops as well as to make withdrawals from the "hole in the wall".

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