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July 6, 2009

Newcastle BS may be forced into the arms of Skipton

by Gill Montia

Story link: Newcastle BS may be forced into the arms of Skipton

Newcastle Building Society could be swallowed up by rival, Skipton, according to a report in the Mail on Sunday.

Such a move would create a £21 billion mutual with more than 1.1 million members.

In December of last year, Newcastle was forced to boost its capital through the issue of £10 million worth of Permanent Interest Bearing Shares, which the society said would offset exceptional write-offs of around £35 million resulting from its exposures to Icelandic banks.

In April, the Society had its credit rating downgraded by Moody’s on fears of further falls in UK property prices, followed by a downgrade by Fitch in May, on the basis that its buy-to-let mortgage book could lead to significant impairment charges.

Concern for the UK’s mutual sector has been growing since the sudden collapse of Dunfermline Building Society in March.

Once seen as models of responsible lending and safe havens for savers’ cash during the financial crisis, the Financial Services Authority has recently announced a consultation on building societies’ business models.

The regulator is apparently anxious to ensure that risk management systems are adequate.

 

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Related stories to: Newcastle BS may be forced into the arms of Skipton

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