Yorks and Chelsea building societies 'could merge'

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The Independent Online

Two of the UK's biggest building societies are understood to be in talks over a possible merger, it was reported today.

Yorkshire Building Society and Chelsea Building Society, the UK's second and fourth largest societies respectively, could announce plans for a tie-up as early as this week, according to Sky News.



If a merger did go ahead it would create a building society with total assets of nearly £38 billion, 178 branches and 2.7 million members.



Stuart Bernau, chairman and stand-in chief executive of the Chelsea, is expected to announce the results of a three month review of the society's future to its board on Thursday.



The report is believed to look at whether the Cheltenham-based society should remain as an independent business or seek a merger with another institution.



Building societies have been hit hard by the credit crunch, although the Yorkshire is thought to have fared better than the Chelsea as it does not have exposure to riskier buy-to-let lending.



In August, Chelsea said it had been the victim of mortgage fraud, taking a £41 million hit on buy-to-let and self-certification loans.



The problem left it with a £26 million loss for the first half of the year, compared with pre-tax profits of £23 million a year earlier.



The societies also both had their credit ratings downgraded by rating agencies Fitch Ratings and Moody's earlier this year.



Both have been involved in the wave of consolidation seen across the mutual sector in the wake of the credit crunch, with the Chelsea taking over the Catholic Building Society, while Bradford-based Yorkshire took over its smaller rival Barnsley Building Society last year.



There are no details on how a possible tie-up between the Yorkshire and Chelsea would work, but it is unlikely that the move would trigger a windfall for members.



None of the mergers seen during the past two years have led to payouts as societies have instead looked to conserve their cash.



No one from either Yorkshire Building Society or Chelsea Building Society could be contacted to comment on the speculation.

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