Yorkshire and Chelsea warn of job cuts
THE merger of the Yorkshire and Chelsea building societies will lead to job losses and a £200m writedown on Chelsea’s bad debts, the two firms said yesterday.
More than 3,200 staff work for the two societies which will undergo efficiency savings of £35m.
The merger was instigated by Yorkshire after Chelsea was hit hard in the economic downturn.
The new society will have assets of £35bn, 2.7m members and a national network of 178 branches.
But Yorkshire and Chelsea warned in a joint statement yesterday: “The merger will lead to a number of job losses. Redundancies will only be considered after full consultation and after other options, including redeployment, have been considered.”
Chelsea’s 700,000 members will receive no windfall under the deal – which will create the UK’s second largest building Society after Nationwide.
Yorkshire admitted yesterday that it would have to take a writedown of at least £200m after the completion of the takeover to provide for future losses from Chelsea’s existing loans.
The merger also hinges on Chelsea’s bondholders, who have been asked to write off half of £100m debt and accept the remaining £100m in a contingent capital (CoCo) instrument that converts into equity if the mutual’s tier 1 capital ratio falls below a certain level.
The merged entity will be known as Yorkshire Building Society – although the Chelsea brand will be retained – and will run by Iain Cornish, the present Yorkshire chief executive.
He said: “This merger creates a second major force in the building society sector. Joining with Chelsea offers a great opportunity to build on the strengths of both societies and form a strong, independent organisation.”
In the six months to the end of June, Chelsea reported a £26m pre-tax loss and net interest income of £24m. In the same period, Yorkshire posted pre-tax losses of £22m and net interest income of £70m.
Chelsea has 35 branches, serving 606,000 savers and 140,700 borrowers.
The combined group will follow the traditional building society model.