Mike Travis, chief executive of Heart of England, the 25th largest society, with pounds 1bn of assets, said: 'We don't have the critical mass to remain competitive in the long term. We are merging with the most cost-effective society.'
Heart of England, which has 30,000 borrowers and 230,000 savers and is based in Warwick, made pre-tax profits of pounds 1.6m after provisions of pounds 12.3m for bad debt. It has 50 branches. Twelve of them overlap with C&G branches. C&G, which is 16 times the size of Heart of England, has four times the number of branches.
'Rationalisation is inevitable,' Mr Travis said. But he added that the merger should not be seen as a rescue. 'We would be very aggrieved if it was described as a rescue,' he said. Mr Travis will remain with the merged society as a regional manager.
Andrew Longhurst, chief executive of C&G, the sixth largest society, with 1.1 million savers and 337,000 borrowers, said the merger was part of its policy of expanding its share of the mortgage market by mergers. It has taken over the Portsmouth, Guardian, Peckham, Walthamstow, Cardiff, Colchester, London Permanent, Bolton, Bury St Edmunds and Essex Equitable building societies in recent years.
Savers over 18 with a minimum of pounds 25 in Heart of England will receive an extra 0.25 per cent paid on their accounts for a year after the planned merger on 1 October, and all accounts will become instant access. Borrowers will receive a pounds 100 discount on the valuation fee if they take out a C&G mortgage.
Heart of England members will vote on the proposed merger at the annual meeting on 8 June.
John Wriglesworth, housing analyst with the stockbroker UBS, said the deal made sense for both parties.Reuse content