Yorkshire members vote for Chelsea merger

Savers and borrowers with Yorkshire Building Society have voted in favour of a merger with Chelsea, a fellow mutual lender, creating what is claimed will be a “second major force” after Nationwide in the building society sector.

About 85 per cent of the more than 200,000 Yorkshire savers and borrowers who voted backed the deal, which is effectively a takeover of Chelsea.

Members of Chelsea, which decided to pursue a merger after suffering up to £41m of mortgage fraud, gave their approval for the tie-up last week.

The deal, due to complete on April 1 2010, will create a mutual lender with 2.7 members, assets of £35bn and a network of 178 branches.

Both society brands will be preserved.

No windfalls are being paid and there are no specific interest rate benefits or guarantees for customers, although Yorkshire said that cost-cutting should allow it to offer better rates over time.

It added that the enlarged society will have capital ratios among the strongest of any major UK bank or building society, as well as a secure funding base.

Iain Cornish, chief executive said he was “delighted” that both societies’ members “have recognised the benefits” of a merger.

“The financial services market has changed fundamentally over the last two years and scale is increasingly important to the efficient operation of building societies and access to funding markets. Our members can, however, be assured that we will not become too big to offer the personal service which we pride ourselves on. “

This is the 8th building society takeover or merger since the start of the credit crisis, and analysts expect further deals as other mutual lenders struggle with lower profitability. There are about 50 societies still operating, ranging from sector leader Nationwide to one-branch local entities such as Edinburgh’s Century Building Society.