Newcastle Building Society has commenced discussions to take over Manchester Building Society. Both entities have entered an exclusivity agreement to explore this potential merger, aiming to transfer Manchester Building Society’s operations to Newcastle Building Society.
If the negotiations are successful, the merger would significantly expand Newcastle Building Society’s presence and operational reach, making it the UK’s 8th largest building society with around 336,000 members. Manchester Building Society, relatively smaller with 11,000 members and no physical branches, has struggled since 2016 due to restrictions on new lending imposed by the Prudential Regulatory Authority for insufficient capital on its balance sheet.
The potential merger was formally announced through a statement to the Stock Exchange, asserting that it would only proceed if it benefits members of both organisations. The earliest projected completion date, subject to legal and regulatory approvals, is mid-2023. The statement emphasised that discussions are in an early stage, and there is no guarantee of the merger’s occurrence or its specific terms and timing.
Newcastle Building Society has shown resilience and growth, reporting a half-year profit increase to £14.2m despite a slight revenue dip. The society has ambitious plans to defy the financial sector’s current trend by opening more branches, expanding into Yorkshire with new openings in Knaresborough and Hawes. It also plans to consolidate its operations by relocating its headquarters from Newcastle city centre to Cobalt Business Park in North Tyneside, which it acquired three years ago.
On the other hand, Manchester Building Society has faced financial challenges, notably a legal tussle with its former auditors Grant Thornton, which resulted in a £14.3m award. This merger could provide a lifeline for Manchester Building Society by stabilising its financial footing and potentially reviving its capacity to offer new lending services.
In summary, the proposed merger between Newcastle and Manchester Building Societies could bolster Newcastle’s market position while offering Manchester a crucial opportunity for financial recovery. Both societies are carefully navigating the initial stages of these discussions, with all eyes on mid-2023 for possible completion.
