Printer Friendly

LARGE U.K. BUILDING SOCIETY MERGER WILL BOLSTER SECTOR, FITCH SAYS -- FITCH FINANCIAL WIRE --

 NEW YORK, Aug. 4 /PRNewswire/ -- The friendly merger of Leeds Permanent and National & Provincial building societies will strengthen the United Kingdom's building society sector, Fitch says. The action is prompted by the belief that profitable growth can be most efficiently achieved through a merger. Staff changes and reductions in branch and estate agency offices should enhance operating efficiency. The new organization will benefit from broader funding capabilities and greater critical mass in a saturated home mortgage market. Both societies have broad geographic coverage of the U.K. with a slight emphasis on the north, which has proven more resilient during the real estate downturn.
 The merger also boosts the new entity's competitiveness in the personal finance and home mortgage markets with respect to clearing banks and Abbey, the second largest mortgage lender in the U.K. Building societies are primarily retail funded and their growth in the fixed-rate mortgage sector has been somewhat restricted by regulatory limits on wholesale funding. Greater penetration of U.K. clearing banks in the fixed-rate mortgage sector has posed a competitive threat to building societies.
 The proposed combination is not a rescue similar to recent regulatory coordinated mergers of smaller societies. Rather, it is motivated by the desire to boost competitiveness broadly in the U.K. banking sector. The merger of two larger and well performing societies could serve as a catalyst for further consolidation among stronger medium-sized societies. Fitch rates the long-term debt and commercial paper of Britannia ('A/F-1') and commercial paper of Nationwide ('F-1') and Yorkshire ('F-1').
 Successful implementation of the merger will depend on overcoming a number of cultural differences between the two societies, including product development and funding philosophies. Once these steps are taken, management should be able to achieve synergies, higher income levels, and lower costs. Fitch calculated that as of the most recent reporting dates, N&P's ratio of management expenses and provisions to total income was 75 percent, above the peer average of 66 percent and Leeds's 68 percent. Although David O'Brien, N&P's chief executive, will head the new entity, the new management team is expected to draw from both institutions.
 The new entity would become the fourth largest residential mortgage lender behind Halifax Building Society, Abbey National PLC, and Nationwide Building Society. Leeds and N&P are the fifth and eighth largest societies with solid balance sheets and stable funding. As of the most recent reporting dates, Leeds had assets of 19.4 billion pounds and N&P reported assets of 12.0 billion pounds. Fitch expects the U.K. Building Societies Commission and societies voting members to approve the merger in early 1994.
 -0- 8/4/93
 /CONTACT: Ricardo J. Kleinbaum of Fitch, 212-908-0525/


CO: ST: New York IN: CST SU: RTG

LD -- NY085 -- 9545 08/04/93 16:50 EDT
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Aug 4, 1993
Words:467
Previous Article:THREE-FIVE SYSTEMS INC. ANNOUNCES POSSIBLE RELOCATION TO NEW FACILITIES
Next Article:UNITED WAY TO RECEIVE $250,000 GRANT FOR FLOOD RECOVERY FROM UPS
Topics:

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters