Manchester and Newcastle building societies agree merger in efforts to safe north west group’s long-term future after 10-year lending drought

  • The two events initially entered into an exclusivity settlement final August
  • Manchester Building Society has simply 11,000 members and c.£200m in belongings
  • Newcastle has 345,000 members, 1,400 staff and complete belongings of c.£5.3bn 

Bosses at Newcastle Building Society and Manchester Building Society have agreed to a merger in an effort to safe the latter’s long-term future. 

The two events initially entered into an settlement final August to discover the potential for combining operations via transferring Manchester’s engagements to Newcastle.

In a joint replace on Tuesday, the 2 building societies mentioned a tie-up would assist give Manchester prospects better product alternative and rates of interest which might be both the identical or greater than they at present have.

Manchester has not engaged in lending since 2013, in line with the assertion, and ‘faces uncertainty round its long-term future within the absence of a transaction.’

Tie-up: Newcastle Building Society has agreed on a merger with Manchester Building Society

Tie-up: Newcastle Building Society has agreed on a merger with Manchester Building Society

Additionally, Manchester’s board believes the group could be unable to face up to a ‘main monetary or financial stress’ while not having to lift capital from traders.

The monetary establishment, which celebrated its centenary final yr, has not undertaken any new lending for the previous decade as a part of plans to de-risk and cut back the dimensions of its steadiness sheet.

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Under current forecasts, the enterprise expects losses to proceed exhausting capital reserves whereas remaining as a standalone entity.

‘Accordingly, the Manchester board has thought of a spread of strategic choices and concluded that one of the best pursuits of members could be served by a merger with a bigger, stronger building society,’ the replace mentioned.

Manchester Building Society has 11,000 members, 44 workers and round £200million in belongings below administration, in comparison with Newcastle’s 345,000 members, 1,400 staff and belongings of £5.3billion.

The pair mentioned an amalgamation would offer ‘better resilience and further capital power’ and a pipeline for Manchester employees to the Newcastle Group and its fintech subsidiary Newcastle Strategic Solutions. 

Formed itself by means of a merger within the Eighties, Newcastle is the UK’s eighth-biggest building society with 31 branches located throughout the North East of England.

In its most recently-published monetary outcomes protecting the primary half of 2022, the organisation revealed pre-tax earnings had declined by £1.7million year-on-year to £14.2million amidst decrease mortgage lending volumes. 

Andrew Haigh, Newcastle’s chief govt, mentioned: ‘The merger presents a chance for each our societies to come back collectively in a manner that really advantages each units of members.

‘As a financially sturdy, purpose-powered enterprise, the transfer helps Newcastle Building Society in delivering our progress technique at better scale and affect, and in a manner that gives alternative for members and colleagues from each organisations.’

The merger’s approval depends on the Prudential Regulation Authority (PRA), following which it’s anticipated to come back into impact at first of July. 

But if the PRA refuses to present the thumbs up, one of many two building societies might change into responsible for prices of as much as £1million. 

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