Nationwide merges with Derbyshire and Cheshire

The Nationwide, already Britain's biggest building society continues to grow and expand. Following its takeover of the Portman last year, the Nationwide has now added fellow mutuals The Derbyshire and Cheshire to its list of acquisitions.

It is understood that The Derbyshire approached Nationwide after a review showed it was facing losses from credit defaults in its near-prime and sub-prime residential mortgage portfolio that would lead to a pre-tax loss of £17m this year. Mortgage brokers across the country were expecting some sort of announcement after The Derbyshire announced on Friday that is was to cease residential mortgage lending through its intermediary focussed subsidiary Salt.

In a separate and unrelated move, the Cheshire approached the Nationwide after suffering from current market conditions and problems with one commercial loan in particular. It is thought that the Cheshire will also post a seven figure loss this year, and it is understood that the merger talks have had the backing, and been encouraged by the Financial Services Authority.

Industry thinking is that these are not the last mergers that will occur between building societies as many fight to stave of the difficulties caused by the credit crunch and the lack of liquidity. Difficulties in raising new capital, and regulatory burden is felt far more by smaller societies, and a merger with a much larger organisation has obvious attractions.

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