In a statement, Manchester Building Society said that the merger would give greater product choice to savers and borrowers, as well as interest rates that are better than or in-line with their current deals.
Members would also benefit from being part of a mutual that “continues to grow strongly” and is the eight largest in the country.
It added that Manchester Building Society’s employees, barring executive directors, would have “the opportunity to further their careers as a valued and continuing part of a larger organisation”.
Both parties said that the merger would lead to “greater resilience and additional capital strength” and enhance Newcastle Building Society’s growth strategy.
The statement also said that a Manchester base could “provide additional opportunities for a pipeline of talent” to Newcastle Building Society, including its fintech business Newcastle Strategic Solutions.
Newcastle Building Society: Move benefits both sets of members
Newcastle Building Society’s chief executive Andrew Haigh said: “The merger presents an opportunity for both our Societies to come together in a way that truly benefits both sets of members.
“As a financially robust, purpose-powered business, the move supports Newcastle Building Society in delivering our growth strategy at greater scale and impact, and in a way that offers opportunity for members, and colleagues from both organisations.”
Manchester Building Society’s chairman David Harding added: “Manchester’s board strongly believes that this merger is in our members’ best interests.
“Our members will become part of a larger, financially robust Society that can offer a range of products and services we are unable to match as a standalone entity whilst providing staff at Manchester with long-term opportunities within the Newcastle Building Society and Group.”
Manchester Building Society was formed in 1922 but has not undertaken any new lending since 2013.
The mutual has close to 11,000 members and no branches. It employs 44 people and as of the end of last year it has total assets of £200m subject to an audit, making it the 41st largest building society in the UK.
The Manchester board said that its current capital and liquidity position was “regulatory-compliant” but it “lacks the scale and resilience to endure major financial or economic stress without raising additional capital”.
The board added that as a standalone firm it would incur “recurring losses which will deplete capital reserves each year”.
PRA approval granted
The Prudential Regulatory Authority (PRA) has approved the request by the Manchester and Newcastle board to transfer Manchester’s engagements to Newcastle so it can proceed by a board resolution, and a vote by members of either society will not be required.
The next steps of the merger are for the boards of both societies to pass a resolution to proceed with the merger, and then for the PRA to confirm the merger.
If the PRA decided to confirm, then the merger is expected to come into force on 1 July.
If the merger does not proceed as planned then there may be requirement for one of the societies to pay the other’s external costs up to £1m.
Manchester members will be sent a merger notification statement at the end of March.
