Members of Norwich & Peterborough have agreed to a merger with Yorkshire Building Society, the UK’s second largest mutual.
Savers and borrowers voted overwhelmingly in favour of the move, with close to 90 per cent in agreement.
The merger remains subject to confirmation by the Financial Services Authority (FSA), which is expected on 1st November 2011.
Members did not receive a bonus for their decision, however N&P pointed out that no members were losing their rights in the deal and said that it was preserving capital for the benefit of combined membership.
The N&P brand will remain separate within the Yorkshire group, and members will not be able to use branches of other brands. Savings rates will remain the same but N&P’s standard variable mortgage rate will be reduced in line with Yorkshire’s from 5.35 per cent to 4.99 per cent when the merger is finalised by the FSA.
Gordon Horsfield, chairman of N&P, said that in the post-financial crisis world scale had become more important in order to provide cost efficient services to customers: “the enlarged society will have capital ratios which are amongst the strongest of any UK lender, bank or building society.”
N&P, the country’s ninth largest society, was hit hard by low interest rates and higher funding costs following the financial crisis and fell into further trouble following the Keydata scandal when it was fined £1.4m for mis-selling investments to more than 3,000 customers.
The mutual’s large deposit base of about £3.5bn and 120,000 current account customers made it an attractive prospect to rival mutuals in need of retail funds and both Virgin Money and US private equity group JC Flowers were thought to be interested.
In April 2011 it was announced that Yorkshire, one of the country’s strongest mutuals, had agreed to a a takeover. Yorkshire has emerged from the crisis as one of the country’s stronger mutuals, absorbing both Chelsea and Barnsley building societies as well as buying Egg’s 550,000 mortgage and savings customers from Citigroup.
The mutual sector has undergone considerable consolidation since the financial crisis, as stronger societies have bought up weaker ones struggling to raise capital.
However Adrian Coles, director-general of the Building Societies Association, said the sector was now in a much stronger position and had renewed confidence.
This year a number of societies have reported higher profits, including Skipton, Leeds and Nationwide, the UK’s largest building society, which reported a 30 per cent increase in annual profit.