Search is on for the next big merger

John Willcock on what yesterday's High Court decision will mean for Britain's building societies

A City scramble began last night to pick the next big building societies lining up to merge. Yesterday's High Court approval of the link by the Halifax and Leeds created the biggest share payout bonanza on record in Britain.

Speculation immediately centred on Alliance & Leicester, Woolwich, National & Provincial, Bradford and Bingley and Birmingham Midshires as prime candidates.

It is open knowledge in the industry that most of the remaining top ten societies are talking to each other about possible mergers. The fear that the Lloyds deal would lead to a series of bank takeovers has receded since last year's Treasury review of building societies, which gave them access to the money markets and new areas of business and enabled them to compete with the banks head-on.

City analysts said yesterday's ruling had given further impetus to Halifax's strategy - merger with a society to give critical mass, and then conversion to plc status.

The key question now facing societies, reeling under intense competition for mortgage business from the banks, is whether to stick with the new Treasury powers or follow Halifax, Cheltenham & Gloucester and Abbey National by ditching mutuality.

Supporters of the Halifax strategy inside the remaining societies have been strengthened by yesterday's decision. Fears that 2 million Halifax borrowers and half a million Leeds borrowers would not be eligible for free shares following the conversion to bank status were quelled by Judge Sir John Chadwick's ruling.

Last year a similar examination of the Building Societies Act 1986 resulted in over 300,000 Cheltenham & Gloucester mortgage borrowers being barred from receving payments under the proposed £1.8bn acquisition by Lloyds Bank.

City opinion yesterday was that the C&G deal would very probably go through on Friday, but there was still a possibility of a borrower rebellion. The search is now on for the next deal.

According to industry sources the societies keenest for a merger and conversion are National and Provincial, Britain's ninth-largest society, and Birmingham Midshires, the 13th largest. Those seeking a merger at the very least are thought to include the Alliance and Leicester, Britain's fourth-largest, which wanted to merge with the Leeds before the latter was snapped up by the Halifax.

Industry sources say Bradford and Bingley, the seventh-largest, iand Woolwich, third-largest, are also looking for mergers.

Woolwich's chief executive, Donald Kirkham, is a stern traditionalist and champion of the virtues of mutuality. Indeed, industry analysts admit that there is very little pressure from building society members themselves to convert to plc status. Mutual societies have a friendlier image than the high street banks and many savers and mortgage borrowers like the fact that they are the owners as well as customers of the society.

However, Mr Kirkham is due to retire this year and industry sources suggest Woolwich may follow the Halifax strategy. Corporate financiers eager for work are hopeful that public enthusiasm for the Halifax/Leeds share giveaway will sway the societies.

Both the Leeds and the Halifax have their roots in the 19th century savings movement, but are now planning for the millenium and beyond. No one understands that better than Mike Blackburn. Until 1993 he was chief executive of the Leeds, moving "down the road" to a similar job with the Halifax. At that time the Leeds was the fifth-largest building society, while the Halifax was already the industry leader, with almost twice the assets of its nearest rival, the Nationwide. The Halifax is now the UK's largest provider of home mortgages, and also has the largest estate agency chain.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor