Members to fight Leeds merger plan: Maria Scott reports that some of the building societies' customers fear the loss of convenient local branches

A campaign is under way to scupper the pounds 32bn merger planned between the Leeds Permanent and National & Provincial building societies.

Jim French, chairman of the Building Societies Members Association, a pressure group representing building society members, said he would be urging members of the societies to vote against the merger.

Mr French is a Leeds customer who is mounting his fourth attempt to gain a seat on the society's board.

He believes the merger plan, which would create Britain's third-largest society, would restrict competition. He points to the relatively small number of banks as a reason for the apparent dissatisfaction with their services. He also believes the merger is another example of building societies being more interested in profit than service.

Ted Germaine, a former marketing manager at Leeds who was sacked in 1989, is also trying to gain a seat on the board. He branded the merger plan a waste of money. Leeds had just spent millions on giving itself a new corporate image. The directors were 'obsessed with league tables. They want to move from number five to number three,' Mr Germaine said.

Between them, Leeds and N&P have more than 7 million customers, and both savers and borrowers have the right to vote on the deal. But, in fact, building society members rarely oppose the recommendations of building society boards.

Mr French admits that the BSMA, with its pounds 5 annual membership fee, is not in a position to mount a lavish campaign. However, he may be more than a lone voice this time. Opposition to the merger could be vocal, since the societies have admitted it could mean the loss of 1,600 jobs. One of their main objects is to cut costs, and the combined branch network will be reduced from 769 to 650.

This worries people like David Smith, of Ealing, who is disabled and fears his N&P branch will be closed. His nearest Leeds branch is three or four miles away. 'This merger will benefit the directors of the societies but not the staff or the members,' he said. Mr Smith said he was prepared to raise a petition on behalf of staff at his local branch, who he said were 'always smiling and cheerful'.

Members of Leeds and N&P can also point to the unhappy merger experience of Nationwide Building Society members. Nationwide is the result of the largest merger in recent years, between Nationwide and the Anglia. This did not go well and is blamed by insiders for problems leading to the stream of complaints from customers over the past two to three years.

Some Leeds and N&P customers may also resent the absence of a commitment to pay a bonus to compensate them for the merger, although this has not been ruled out. Bonuses have become customary in recent mergers and takeovers, but the view of analysts is that in this case the societies' reserves do not justify this.

Hundreds of customers telephoned the two societies' offices after the merger was announced this week. Managers said most were asking about likely changes to their accounts.

David O'Brien, the chief executive of N&P who is to be head of the newly formed society, which will be known as Leeds, will put up a spirited fight against any opposition from members. He argues that the merged societies will be more competitive as a single unit, because of the cost savings.

He promises a wider choice of products and services for Leeds customers courtesy of N&P's portfolio of unit trusts, and its personal equity plan. The society has also been offering new-style savings accounts that offer a return linked to the stock market. The return is achieved using futures and Mr O'Brien wants to develop further derivatives-based products.

He also sees potential for new types of income-producing products.

If the merger goes ahead, Mr O'Brien said, Leeds' Liquid Gold instant-access savings account, which currently pays between 1.5 per cent and 5.6 per cent gross, and other savings accounts will be merged with N&P's accounts.

N&P's Instant Reserve is paying between 1 per cent and 5.6 per cent.

The two societies' credit card operations will also be merged. N&P is one of the few card operators that does not charge an annual fee, while Leeds cards make donations to charity. Mr O'Brien said he planned to offer these choices to customers after the merger.

At present both societies charge a standard mortgage rate of 7.99 per cent. As the third-largest society, the newly constituted Leeds would be influential in setting market rates for mortgages.

Borrowing and savings members of the two societies will have to vote on the merger. The societies will need a 75 per cent majority among the savers who vote and 50 per cent among borrowers. General meetings will probably be held in the autumn, with the aim of merging the societies next year.

The Building Societies Members Association can be contacted on 081-769 0165.

National & Provincial Building Society has set up a helpline for customers with queries about the merger: 0800 40 40 41.