Building society jobs at risk as mutuals confirm merger plans

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The Independent Online

A merger between the Yorkshire and Chelsea building societies, which was confirmed yesterday, will lead to potentially hundreds of job losses and several branch closures.

Yorkshire and Chelsea said that they had finalised the deal, a day after admitting they were in talks and were "very close" to an agreement. Iain Cornish, the chief executive of Yorkshire, who will take control of the combined group if members back the deal, said that jobs would go. "We are looking for synergies of between £35m and £40m and clearly there will be an impact on jobs," he said. "But savings will be made in other areas too, for example, we are not going to need two IT systems."

Mr Cornish and Stuart Bernau, the executive chairman of Chelsea, stressed that the deal was not a takeover: "We are not in the business of rescue deals," said Mr Cornish. The combined group, which will create the UK's second biggest mutual with assets of more than £35bn, will be based in Bradford and will be called Yorkshire Building Society. Yorkshire's chairman Ed Anderson, will continue in the job, while Mr Bernau, who initiated talks, will leave.

He was brought into the group in August after Chelsea disclosed that it had been forced to write off £41m after fraudulent activity in its buy-to-let and self certification mortgage businesses. The problem led to a £26m loss in the first half of the year. Since his appointment, Mr Bernau has conducted a review, and has not hidden his wish to forge a deal with a bigger mutual.

Yorkshire has already done a deal with the bondholders on £200m of Chelsea's subordinated debt. The creditors have effectively agreed to write off £100m of debt, with the remainder switching into convertible equity notes, which change into an instrument similar to equity if a company's capital position deteriorates.