Goodbye the Leeds

THIS Tuesday, a third of the UK's building society sector will change for ever. Cheltenham & Gloucester will officially become part of Lloyds Bank, while all branches of the Leeds will re-open as branches of the Halifax.

The changes are more than symbolic, and illustrate the "merger fever" in the embattled mutual building society industry. National & Provincial is also in the process of being sucked into Abbey National.

C&G, which claims to be the lowest-cost provider of mortgages among societies, will become a "mortgage factory" for Lloyds. The 147-year-old Leeds will disappear into the maw of the Halifax, as a prelude to converting into one of the UK's biggest banks.

The most apparent changes will be at the Leeds. All its 400-plus branches closed yesterday lunchtime and will stay shut tomorrow while the "Leeds" signs are replaced by Halifax livery. They will reopen on Tuesday with their famous "liquid gold" accounts, as advertised by the ubiquitous George Cole of Arthur Daley fame, rebranded as "Halifax liquid gold".

Leeds' mortgages will stay much the same, but its insurance and unit trust products will switch to Halifax.

Lloyds, meanwhile, is licking its lips at the prospects for selling C&G mortgages through its 1,800 branches, following its pounds 1.8bn acquisition of the society. Sir Brian Pitman, Lloyds' chief executive, said on Friday: "C&G . . . will be the lowest-cost producer among all the national building societies. C&G will offer mortgages at 25 basis points [0.25 per cent] lower than some other named competitors. We already have some pilot ventures between Lloyds and C&G."

He compares C&G's costs, at 30 per cent of income, with Lloyds' own 60 per cent, the average for the high-street banks.

The remaining societies acted last week to avoid being picked off by a bank. They increased the minimum amount required in their savings accounts, to stop the current sport of depositing pounds 100 in each society in the hope of a "winner" - an acquisition payout by a bank predator.

Societies have been besieged by punters hoping to cash in on merger mania. Two societies have already reacted by hiking their minimum savings levels in order to stop this "hot money" sweeping around the system. Others say they are preparing to follow.

Woolwich has increased its minimum balance from pounds 100 to pounds 500. Chelsea has acted similarily, raising its minimum investment for the Instant Options account from pounds 100 to pounds 1,000. Both are potential bid targets.

Alliance & Leicester and Nationwide said they may follow suit. The Yorkshire has seen 300-400 new accounts being opened every week at its 134 branches, far more than normal.