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Yorkshire B.S. (YBS)

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Wednesday 20 April, 2011

Yorkshire B.S.

Merger Update

RNS Number : 2475F
Yorkshire Building Society
20 April 2011
 



 

 

 

 

 

 

                                                            20th April 2011

 

YORKSHIRE AND NORWICH & PETERBOROUGH BUILDING SOCIETIES

ANNOUNCE PROPOSED MERGER

 

The Boards of Yorkshire Building Society and Norwich & Peterborough Building Society (N&P) announce today that they have agreed the terms of a proposed merger, creating clear and compelling benefits for members of both societies.

 

Yorkshire Building Society is the UK's second largest building society with assets exceeding £30bn, while N&P is the UK's ninth largest society with assets of £3.7bn. The proposed merger will create an enlarged Society with 3 million members and 224 branches.

 

The combined Society, which will be known as Yorkshire Building Society, will be focused on the traditional building society business of residential mortgages and savings and will be principally retail funded. The N&P name will be retained as a separate and distinct brand within the Yorkshire, similar to the Chelsea and Barnsley brands.

 

The merger is subject to final agreement by the Boards of both societies and to certain conditions being satisfied, principally the approval of eligible members of N&P at a Special General Meeting (SGM) and confirmation by the Financial Services Authority (FSA). The proposed merger is expected to complete on 1 November 2011.

 

Merger Rationale

·     The proposed merger will bring together two building societies with shared values and a strong commitment to delivering long-term value to members and exceptional customer service.

·     The enlarged Society will combine the Yorkshire's financial strength and merger experience with N&P's strong regional presence and membership in the east of England.

·     There is a good geographical fit of branch networks, with virtually no overlap, providing a larger and better balanced national presence in the savings and mortgage markets.

·     The merger provides a compelling opportunity to grow and strengthen the long-term position of the enlarged Society, making it better placed to compete and deliver greater value to members as the merger benefits are realised.

·     Yorkshire and N&P enjoy strong member loyalty, have well regarded brands and play an important role in the many communities they serve.

 

Member benefits of the proposed merger

·     Members of both societies will continue to benefit from being part of an independent mutual, with savers and borrowers benefiting from the security and stability provided by the Yorkshire, one of the UK's strongest financial institutions.

·     The enlarged Society will continue to be owned and run for the benefit of its current and future members, offering good long-term value products and excellent customer service.

·     While the Yorkshire has invested substantially in its internet and telephone operations, its branch network remains at the heart of its organisation. It is therefore intended that a high street presence will be retained in all communities where either the Yorkshire or N&P currently have a branch, extending Yorkshire's national branch network. As part of this commitment, all N&P's existing branches will be maintained for a minimum of two years.

·     It is intended that the strong community partnerships and activities of each society will continue.

 

Iain Cornish, Chief Executive of Yorkshire Building Society, said: "N&P has similar values to the Yorkshire. It shares our commitment to mutuality and our determination to deliver long-term value and exceptional customer service to our members. Its traditional building society activities remain profitable and it is well regarded in the communities it serves in the east of England. We will build on N&P's strong brand and the value it has delivered to its members, while gaining the opportunity to consider developing our own products in areas where N&P has complementary capabilities and expertise, such as the current account market.

"We have demonstrated our ability to successfully undertake mergers and deliver benefits to both sets of members. The proposed merger emphasises Yorkshire's position as one of the UK's strongest financial institutions, offering consumers a real alternative to the plc profit-driven model of Britain's banks". 

 

Gordon Horsfield, Chairman of N&P, said: "For many years N&P has been committed to putting its customers at the heart of everything we do, and we know from all their feedback that our way of doing this is warmly and loyally welcomed. The Board concluded some time ago that to uphold this proposition for the longer term requires continued levels of investment in back office, branches, product pricing and range as well as to support training and development opportunities for our staff to help them keep delivering the service expected. The necessary resources for this continuing investment can only readily come from the economies of scale, organisational depth and financial strength associated with size. We also strongly believe that the values and culture associated with the mutual business model are the right ones for our market.

 

"The opportunity to merge with so highly a respected society as the Yorkshire, where these qualities are so evident, is one which is right for N&P. We particularly value their commitments to our members to maintain the branch network, their interest in and concern for our staff, and the open-mindedness and appreciation they have shown of our ideas, products and expertise where these are not presently offered by the Yorkshire, with a view to making them more widely available".

 

Summary of the terms of the proposed merger

The proposed merger is subject to final agreement by both societies. The key terms are set out below;

 

-       The enlarged Society will be called Yorkshire Building Society.

-       The N&P name will be retained as a separate brand.

-       The enlarged Society will continue its commitment to maintain a high level of member engagement in its operations.

-       It is the intention that a high street presence will be retained in all communities where there is currently a Yorkshire or N&P branch, with all N&P branches being retained for a minimum of two years.

-       Yorkshire's existing head office in Bradford will remain the head office of the enlarged Society. An important operational presence will be retained in Peterborough for at least three years.

-       The enlarged Society will be run by the Yorkshire Board and executive management team.

-       The merger will not involve any distribution payments to either membership.

-       Members who are savers with both the Yorkshire (or any brand of the Yorkshire, including Chelsea and Barnsley building societies) and N&P at the time the proposed merger completes, will be limited to one FSCS depositor protection limit of £85,000 per individual - £170,000 for joint accounts.

Consideration will be given to allow savers who, as a result of the proposed merger, exceed this amount to reduce their combined balance without notice or any loss of interest on the amount withdrawn. 

-       Borrowing members on N&P's Standard Variable Rate (SVR) will benefit from this rate being equalised with the Yorkshire SVR (1).

-       There will be no changes in respect of interest rates of savings accounts or mortgage accounts (other than the move to the Yorkshire SVR for relevant N&P borrowers) as a result of the proposed merger.

-       The FSA has given consent to the Yorkshire approving the merger by Board resolution.

-       All N&P's wholesale liabilities, including subordinated debt, will be assumed by the Yorkshire with their terms unchanged when the merger becomes effective.

-       Yorkshire will honour in full the compensation payments programme previously announced by N&P whereby holders of Keydata investment products have been invited to apply for ex gratia payments.

 

Timetable and process

 

-       A Special General Meeting will be held for members of N&P on 22 August 2011 at which N&P members' approval to the proposed merger will be sought. In July 2011 eligible members will receive a merger booklet setting out details of the merger proposal.

-       The merger is also subject to confirmation by the FSA.

-       The FSA has consented to the Yorkshire proceeding by way of a resolution of its Board of directors.

-       The merger is expected to complete on 1 November 2011.

 

(1) The current SVRs for Yorkshire and N&P respectively are 4.99% and 5.35%. However there can be no guarantee as to the SVR on or after completion of the merger.

 

Notes 

About Yorkshire Building Society

Yorkshire Building Society, which has its head office based in Bradford, is the UK's second largest building society with 2.6 million members, 178 branches and assets of over £30bn. It has demonstrated resilience throughout the recession and has maintained one of the strongest financial and capital positions of any major UK lender, while delivering value and financial security to its members.  Yorkshire's financial strength has seen it successfully merge with Barnsley and Chelsea building societies.

Yorkshire reported a very strong financial performance for the year ended 31 December 2010, with the Society announcing a significant increase in profits, a robust capital position and an increase in new members. Key highlights include:

Financial Strength

-       Strong growth in core operating profit to £128.5m.

-       Increase in retail savings balances to £21.4bn.

-       Net interest income of £272.7m.

-       Core tier 1 capital ratio of 12.4% on a standardised basis.

-       Prudent group liquidity ratio of 21.1%.

-       Low underlying cost to mean assets ratio of 0.51%.

Operations

-       Opened over 270,000 new savings accounts by continuing to offer savers attractive rates, which are sustainable and balance the interests of existing and new members.

-       Tripled new lending, demonstrating the Yorkshire's commitment to be active in the mortgage market while maintaining a prudent lending policy and focus on prime, residential mortgages and high credit quality.

-       Overwhelming majority of lending continues to be funded by customer savings (94%, or 100% if reserves are included), with low reliance on wholesale funding.

 

Value for Members

-       Group average interest rate paid on cash ISAs was 2.21%, more than four times higher than the market average rate of 0.40%*.

-       One in three of all new mortgages sold are on an offset basis, maximising the effectiveness of members' savings in a low interest rate environment.

-       Achieved over 2,600 Best Buy mentions in national newspapers for the Yorkshire, Chelsea and Barnsley's mortgage and savings products and was the most quoted mortgage provider in these tables.

-       Industry Awards including Best National Building Society (What Mortgage), Best Overall Mortgage Provider (Moneynet), Best Cash ISA Provider for Service (Moneywise) and Excellence in Treating Customers Fairly (Mortgage Finance Gazette).

*Source Bank of England Interactive Database. Cash Individual Savings Account (ISA) rates are selected for £3,000 balances. Rates for Cash ISAs are weighted by month end balances reported on balance sheet returns of institutions in the same sample.

Customer Satisfaction and Charities

-       Customer satisfaction surveys show that 9 out of 10 members would recommend the Yorkshire to their friends and family.

-       In 2010, Yorkshire donated over £500,000 to more than 2,200 local charities and good causes, largely through donations from the Yorkshire Building Society  Charitable Foundation. The majority of this funding was generated by members through the Society's innovative Small Change, Big Difference Scheme™.

 

About N&P

N&P's head office is in Peterborough.  It is the UK's ninth largest building society with 423,000 members, 46 branches and assets of £3.7bn. N&P has a good underlying business which continues to offer attractive savings and mortgages to its customers and made good progress in 2010. During the year the Society successfully restructured its cost base. As a result pre-tax profit before provisions grew to £5.1m (2009 £1.3m). 

Key highlights include:

Financial Strength

-     Pre-tax profits (before provisions) of £5.1m, representing a substantial increase from £1.3m in 2009.

-     After-tax loss of £48.9m in 2010 (2009: profit after tax of £0.9m), after the exceptional provision of £57m (pre-tax) in relation to Keydata.

-      Retail deposits of £3.1bn, equal to 109% of total loans outstanding.

-      Net interest income of £33.6m.

-       Core tier 1 capital ratio of 13.7% calculated using internal capital models. 

-       Prudent Group liquidity ratio of 23%.

-       Underlying cost to mean assets ratio of 1.04%.

Operations 

-      Opened almost 80,000 new savings accounts.

-      High quality residential mortgage portfolio with only 1.03% of mortgage accounts 2.5% or more in arrears, which compares favourably with the industry average for the same period of 1.66% (source: FSA).

Value for Members

-       Achieved Best Buy mentions in national newspapers every week in 2010-11 for N&P's mortgage, savings and current account products.

-      Industry Awards including Commended for Best Service from a Commercial Mortgage Provider (Business Moneyfacts 2011), Highly Commended for Best Regional Building Society (What Mortgage 2010 awards), Highly Commended for Best First Time Buyer Mortgage Provider (Moneyfacts 2010).

Customer Satisfaction and Charities

-       N&P's independently measured customer satisfaction rating remains strong at 86% in the last quarter of 2010 and 85.5% in the first quarter of 2011.

-       Since N&P made East Anglia's Children's Hospices (EACH) its staff charity in 2007, the Society and its staff have donated over £95,000.

-       Many staff volunteer their time to support local communities.

 

For more information contact:

 

Yorkshire Building Society

Tanya Jackson                        0845 1200 890 / 07881 501098

Citigate Dewe Rogerson - PR Advisers to Yorkshire Building Society

Grant Ringshaw                      020 7638 9571 / 07534 220614

Angharad Couch                     020 7638 9571 / 07855 322727

Tom Baldock                           020 7638 9571 / 07860 101715

N&P

Alison Rolls                             01733 372074

FD - PR Advisers to N&P

Paul Marriott                            020 7269 7252 / 07710 426797

 

Advisers in relation to the proposed merger

 

Yorkshire Building Society

Lexicon Partners - Financial Advisers

Allen & Overy - Legal Advisers

 

N&P 

Fenchurch Advisory Partners - Financial Advisers

Addleshaw Goddard - Legal Advisers

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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