View from City Road: No rout among building societies

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The Independent Online
The single-minded determination of Andrew Longhurst and Sir Brian Pitman has always been the best hope of getting the merger between Lloyds and Cheltenham & Gloucester through in the teeth of opposition from the Building Societies Commission and the law. Now the numbers are beginning to go their way, too.

The plan is to revive something very like the original pounds 1.8bn bid, but without paying anything to members of less than two years' standing or to mortgage borrowers. This is the way the court said last month it should be done. It means an even bigger windfall for those who are eligible.

Assuming it goes through, will the floodgates open for other bank and building society bids?

The City clearly thinks they will. Make no mistake about it, however; it is still going to be an uphill struggle for Lloyds to secure the necessary vote of approval. In other cases, it could well prove a climb too difficult to complete. If Lloyds succeeds at all it will be because of the excellent information C&G has on its own customer base, developed over several years of planning for just this eventuality. Few others have such a grip on their own data or could assure a potential buyer of the likely outcome in such a confident manner, when on paper the chances of success still look at best finely balanced.

C&G has information to confirm that most of its borrowers - who cannot be paid - are also savers who can be. With good marketing, it might therefore be possible to secure the necessary 50 per cent vote in favour among borrowers. How many other societies are in that position?

If societies had been allowed to make cash offers to all their savers and borrowers in the way C&G first attempted, then it would have been a walk-over for the banks and there would be very few societies left by the end of the century. The voting hurdles reinforced by the courts last month will turn this into a war of attrition rather than a rout.

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