Nationwide Building Society recently announced a merger with Derbyshire and Cheshire building societies. Both societies approached Nationwide after recording massive losses in H1 2008.

The two groups have struggled in the current economic climate. Derbyshire Building Society, which is the UK’s ninth biggest building society, suffered a -£17m loss in the first half of 2008 and the Cheshire, the UK’s 11 th largest building society, lost -£10.5m over the same period. The societies faced an uncertain future with the continuing problems in the mortgage markets and have turned to the nation’s largest building society for support. Nationwide said that it believes the merger to be a ‘prudent and pre-emptive action’ which will allow for a strong mutual sector and provide a ‘solid foundation’ for the future.

Peter Williams, executive director of Intermediary Mortgage Lenders Association (IMLA), told PIN: “There are a very specific set of circumstances surrounding these mergers. Coupled with the general pressures being faced by all lenders, Derbyshire Building Society was exposed to a number of difficult loans and the Cheshire suffered a large loss from one bad commercial deal. I believe that Nationwide has acted in a highly responsible manner as by agreeing to the merger it should help to support and sustain the sector and give a general air of financial stability. I would not expect to see anymore dramatic announcements such as this as I am not aware of any other societies facing a similar combination of pressures.”