UK building society Nationwide said today it will merge with The Derbyshire and The Cheshire building societies after both suffered bad debt-induced losses in the first half of 2008.
Nationwide said the tie-ups will create a mutually-owned group with nearly 15 million members, assets of £191 billion, and £122 billion in retail deposits.
Britain's second largest mortgage lender said The Derbyshire and The Cheshire independently approached it after bad loans left them with pretax losses of £17 million and £10.5 million respectively for the six months to June 30th.
The mergers will be completed through board resolutions, side-stepping the usual requirement for a vote in favour by the societies' members, Nationwide said.
In order to preserve the enlarged society's capital reserves, Derbyshire and Cheshire customers will not receive a payout.
"The Derbyshire and the Cheshire have independently concluded that a merger with Nationwide is in the best interests of their savers and borrowers given the financial issues faced by both societies," Nationwide Chief Executive Graham Beale said in a
statement.
The Daily Telegraph reported this morning that the tie-up between the Nationwide and The Cheshire had been encouraged by the Financial Services Authority, the UK's financial market regulator.
Nationwide said that its trading in the first four months of its financial year were in line with its own expectations, and described its asset quality as "strong".