Nationwide to take over two struggling lenders

By Myles Neligan

LONDON (Reuters) - Nationwide POB.L, the No.1 customer-owned lender, is to take over The Derbyshire DBSx.L and The Cheshire CEBAw.L building societies after bad debt-induced losses left both facing "financial issues".

Nationwide, the country's No.2 mortgage lender, said the move was instigated by its smaller rivals, who approached it after suffering first-half pretax losses of 17 million pounds and 10.5 million pounds respectively.

In order to avoid "prolonged uncertainty", the deals will be completed through board resolutions, side-stepping the usual requirement for a vote in favour by the societies' customers, Nationwide said.

Derbyshire and Cheshire customers will not receive a payout so as to preserve the enlarged company's capital.

"The Derbyshire and the Cheshire have independently concluded that a merger with Nationwide is in the best interests of their savers and borrowers given the financial issues faced by both societies," Nationwide Chief Executive Graham Beale said in a statement.

FSA AWARE

The mergers look set to create a mutually owned lender with nearly 15 million members, assets of 191 billion pounds, and 122 billion pounds in retail deposits, consolidating Nationwide's position as the No.1 building society.

Nationwide chief executive Graham Beale said the lender had not been approached by any other struggling mutuals, and played down suggestions that the tie-ups were facilitated by the Financial Services Authority in an effort to prevent market instability.