Newcastle Building Society in advanced talks with Skipton
According to The Mail on Sunday, Newcastle Building Society is in advanced talks with Skipton Building Society, which will see further consolidation within the sector.
Newcastle BS, which is the country’s 10th biggest building society, has been struggling after a poor performance in 2008 when it reported losses of £35 million as a result of exposure to the failed Icelandic banks.
Should a deal prove to be successful between the two mutuals, it would create a £21 billion institution with over 1.1 million members.
Skipton is regarded as one of the stronger building societies by the Financial Services Authority, however, the mutual has not been immune to the credit crunch.
Last year, Skipton announced profits of £22.5 million and it has recently finalised its takeover of struggling mutual, Scarborough Building Society.
Meanwhile, concerns over the future of building societies came to light earlier this year after Scotland’s Dunfermline Building Society was hastily taken over by Nationwide at the end of March.
Furthermore, Cheshire and Derbyshire building societies have been swallowed up by Nationwide, while Britannia Building Society is in the process of merging with Co-operative Financial Services.
Last month, West Bromwich Building Society agreed a deal that saw the 160-year-old institution saved from collapse.
In the last 12 months alone, eight of the UK’s remaining building societies have reported significant losses due to a combination of lending self-certified and sub-prime mortgages, making commercial property loans, as well as cash held with Icelandic banks.
In April, Moody’s downgraded the credit ratings of nine building societies, due to concerns they will be hit by losses due to the housing market slump.