Nationwide swoops on battered rivals

PremierFella_2

bristolleedsfan wrote: »

Am I correct in :think: that this can be closed within the calendar year + still receive the headline rate of interest as long as the closure has not meant that two withdrawals have been exceeded during the calendar year?

http://www.thecheshire.co.uk/investment-saving-account/regular-saver/members-privilege-regular-saver.asp

The headline rate is not a bonus rate, so that would be how I would read the T&C (the lower interest rate being effectively a "penalty" rate for breaching the withdrawal limit).

Surely if you close the account on January 2nd, after the merger goes through, this is largely irrelevant.

As an aside, I thought it odd that the "Privilege" Regular Saver rate was lower than my existing Regular Saver with the Cheshire (albeit it is a closed issue account).

bristolleedsfan

PremierFella wrote: »

The headline rate is not a bonus rate, so that would be how I would read the T&C (the lower interest rate being effectively a "penalty" rate for breaching the withdrawal limit).

Surely if you close the account on January 2nd, after the merger goes through, this is largely irrelevant.

As an aside, I thought it odd that the "Privilege" Regular Saver rate was lower than my existing Regular Saver with the Cheshire (albeit it is a closed issue account).

No where within the quoted post did i use the word "bonus rate" ( You might say that u didnt say that I did, just that you are quoting my post)

Even though after looking at my passbook ( and becoming aware that Cheshire reg saver runs from calendar year to calendar year rather than account year to account year) i realised that the first paragraph of my post didnt apply to me, I kept the info that Cheshire regular saver year is "calendar year", rather than "account year" to save others possibly seeking the info out, particularly as most ( not all) regular savers run from "account year" to "account year".

Only significance of not being able to close the account ( without forfeiting the headline rate) before 2nd January is that it shows that some people wont be able to add to the tally of Cheshire BS account closures until the next calender year which follows on from the poster who was encouraging people to record their closure values on her webpage.

( My use of the term "headline rate" is the full rate that is shown on Cheshire webpage for that account)

PremierFella_2

Not that its a big issue, but given your post I feel I must reply.

My reference to "bonus rate" was entirely my own reference. My use of the term was to highlight why I read the T&C to mean that the "headline rate" applies. In retrospect I should have written "bonus rate" rather than bonus rate.

You asked a question - I answered it.

Carpetbaggers would probably hold the account until the end of 2008 anyway in the hope that some kind of legal challenge is mounted to scupper the merger, which reports suggest is not officially finalised until December.

edwinac_2

See the following article from the FT. It quotes the director-general of the Building Society Association, Adrian Coles.

The creepy Coles is now tacitly admitting that the mutuals attract cash because of the prospect of windfalls. He even says "don't rule out further windfalls!!!!"

The chance of a windfall is a key selling point for the mutuals.

Note also, the anonymous insider who warns of a "legal challenge from disgruntled savers", angered that there isn't even a small payout for Derbyshire and Cheshire members.

Any lawyers in the house who fancy taking this one on pro bono?!

We've been gagged and robbed, and need your help, please!

Nationwide deal not end for windfalls

Financial Times (London)

By Steve Lodge

Published: September 12 2008 18:18 | Last updated: September 16 2008 12:37

Cash windfalls remain likely from building society mergers in spite of the lack of payouts in Nationwide’s takeover of the troubled Derbyshire and Cheshire societies. But future merger bonuses are expected to be smaller than in recent years, when a minimum of £400 was paid out in some deals.

Adrian Coles, director-general of the Building Societies Association, said that the Derbyshire and Cheshire transactions, triggered by the societies’ multi-million pound losses, had “broken expectations” that all mergers in the sector yielded windfalls, but “this doesn’t mean there won’t be windfalls in the future”.

With the housing downturn increasing pressure for consolidation among the near-60 remaining societies, Mr Coles said that further mergers were “entirely possible in the next two years”.

“I’m pretty confident at the moment there are no more Derbyshires and Cheshires, so I don’t envisage further ‘no windfall’ mergers,” he added.

Nationwide said there would be no payouts in the two latest mergers “in order to preserve capital within the enlarged Nationwide for the benefit of its combined membership”.

The transactions instead offer “security” to the 925,000 savers and borrowers with Derbyshire and Cheshire, the ninth and 11th societies by asset size, who will become members of the largest mutual lender. Thousands of borrowers will also benefit from mortgage rates about 0.5 of a percentage point lower than previously.

However, Chelsea, the fifth largest mutual, which is taking over the one-branch Catholic society, said it expected cash payouts would still be on offer in “beneficial rather than necessary” deals. Catholic members were this week sent details of merger bonuses of between £100 and £500, to be paid as part of the proposed tie-up.

Mergers are an established trend in the sector, and payouts have become the norm for members of the smaller society in a deal. The windfalls give an incentive to vote in favour of what amounts to a takeover.

But, unusually, the Derbyshire and Cheshire mergers are being pushed through by the Financial Services Authority without member votes.

Industry consultants said further mergers driven by “commercial logic”, or by societies that wanted to increase their scale, could be among those yielding payouts, and even troubled mutual lenders could benefit from an auction effect among “white knight” suitors.

However, experts warned that, with the sector facing rising bad debts on mortgages and lower profits, future windfalls were “unlikely to be generous”. This could mean merger bonuses of just £100 for many savers and borrowers.

“Capital is more precious than two to three years ago,” explained one consultant.

Coles at the BSA added that there could even be situations where “healthy” societies wanted to merge with no windfall to preserve capital.

One industry consultant said he was surprised that there wasn’t even a small payout for Derbyshire and Cheshire members, “if only to avoid the risk of a legal challenge from disgruntled savers”.

The FSA said it would be accepting written representations on the mergers – including complaints about the lack of payouts – and a public hearing is also likely before the transactions are due to complete at the end of the year. But any change in terms is unlikely, said experts.

Windfall-seeking savers can become members of most societies by opening accounts with as little as £100. And while most require savers to sign away their right to handouts resulting from demutualisation for their first five years of membership, these signaways do not apply with merger bonuses.

Copyright The Financial Times Limited 2008

wkt54

On a different note - is the Nationwide and other building societies under threat as to what is happening to the investment banks and HBOS?

Francis63

hmmm....

I don't quite understand this part of the above quote from the Times :-

'The transactions instead offer “security” to the 925,000 savers and borrowers with Derbyshire and Cheshire, the ninth and 11th societies by asset size, who will become members of the largest mutual lender.'

So, they are saying 'no windfall, but you get security instead'. Well, thanks for nothing, we already have security. Up to £50k of our cash is guaranteed. We put it in b.society cash accounts because we don't wish to gamble with this part of our savings. If the rates are lowered, well, we can just take out our cash & go elsewhere. So they can stick their promise of security, this is not a 'with profits' deal!. Not for us savers anyway!
:mad:

MarkyMarkD

It's mutual rubbish talk.

There is no increased security in becoming a borrower of a different institution - if you are a borrower, it matters not a jot who you owe the money to.

And there is precious little increased security in becoming a saver in a different institution, for the reasons that Francis63 has so well expressed. Savers can easily achieve security by moving their money.

MiserlyMartin

On a slightly different point, now this merger has happened, can Nationwide branches be used to service and close Derbyshire accounts? I thought they could but a staff member in Nationwide told me they don't deal with Derbyshire accounts!. That doesn't sound right to me, is he wrong?

noh

MiserlyMartin wrote: »

On a slightly different point, now this merger has happened, can Nationwide branches be used to service and close Derbyshire accounts? I thought they could but a staff member in Nationwide told me they don't deal with Derbyshire accounts!. That doesn't sound right to me, is he wrong?

The staff member is correct.
From the media statement by Nationwide:-
http://www.nationwide.co.uk/mediacentre/PressRelease_this.asp?ID=1261

"The businesses of The Derbyshire and The Cheshire will continue on the effective date to operate under their respective current brands as separate trading activities of Nationwide. There are no plans to integrate The Derbyshire's or The Cheshire's member businesses with Nationwide's member business and the branch networks will remain. However, it is likely that some back office and central group functions of The Derbyshire and The Cheshire will no longer be required."

Nigel