Manchester and Newcastle building societies agree merger
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Manchester and Newcastle building associations agree on a merger to secure the long-term future of the North West Group after a 10-year drought
- The two parties initially entered into an exclusivity agreement in August last year
- Manchester Building Society has just 11,000 members and £200 million in assets
- Newcastle has 345,000 members, 1,400 employees and total assets of approximately £5.3 billion
The bosses of Newcastle Building Society and Manchester Building Society have agreed on a merger to secure the latter’s long-term future.
The two sides initially entered into an agreement in August last year to explore the possibility of combining operations by transferring commands from Manchester to Newcastle.
In a joint update on Tuesday, the two building societies said a partnership would help give Manchester customers more product choice and interest rates that are the same or higher than they currently have.
Manchester has not made any loans since 2013, the statement said, and “faces uncertainty about its long-term future if no deal materialises”.
Tie-up: Newcastle Building Society has agreed on a merger with Manchester Building Society
In addition, the Manchester board believes the group would not be able to withstand a ‘major financial or economic stress’ without raising capital from investors.
The financial institution, which celebrated its centenary last year, has not made any new loans in the past decade as part of plans to reduce risk and shrink the size of its balance sheet.
Under current projections, the company expects losses to continue to deplete capital reserves while remaining as a standalone entity.
“Accordingly, the Manchester Board has considered a range of strategic options and has concluded that members’ interests would be best served by a merger with a larger, stronger construction company,” the update said.
Manchester Building Society has 11,000 members, 44 employees and around £200 million in assets under management, compared to Newcastle’s 345,000 members, 1,400 employees and assets of £5.3 billion.
The pair said an amalgamation would provide “greater resilience and additional capital strength”, and a pipeline for Manchester staff to the Newcastle Group, particularly within the Newcastle Strategic Solutions fintech division.
Formed from a merger in the 1980s, Newcastle is the UK’s eighth largest building society with 31 branches across the North East of England.
In its most recently published financial results for the first half of 2022, the organization revealed that pre-tax profit fell £1.7m on an annualized basis to £14.2m amid lower mortgage lending.
Newcastle managing director Andrew Haigh said: ‘The merger presents an opportunity for both of our societies to come together in a way that really benefits both sets of members.
“As a financially robust, purpose-driven company, the move supports Newcastle Building Society in executing our growth strategy at greater scale and impact, and in a way that creates opportunities for members and colleagues of both organisations.”
Approval of the merger is subject to the Prudential Regulation Authority (PRA), after which it is expected to become effective in early July.
But if the PRA refuses to give the thumbs up, one of the two building societies could be held liable for costs of up to £1 million.