Chelsea Building Society to merge with Catholic

Chelsea Building Society

The UK's fifth largest building society, the Chelsea, is to take over one of the smallest mutuals, the Catholic.

The merger is the first since the Portman was taken over by Nationwide back in 2007.

Chelsea Building Society says the merger has been agreed in principle, and will see the Catholic transferring its assets to Chelsea. The Catholic is listed as the third smallest building society, ahead of the City of Derry and Century. As of the end of December 2007, it had assets of £44 million, compared to Chelsea's £13,017 million.

It is likely that bonus payments will be made to members of the Catholic, with the first qualifying date for such bonuses being the 31 May 2008. This means that only those shareholding and borrowing members who had a qualifying savings or mortgage account open with the Catholic on that date will be eligible to receive bonuses.

Although the deal has been termed a 'merger' by the two societies, it is probable that the Chelsea brand will remain. This is similar to the Nationwide and Portman merger, which saw the latter mutual swallowed up into the bigger brand. The Catholic has just eight members of staff and one branch, in Westminster.

Trevor Harrison, chairman of Chelsea, says: "We are looking forward to finalising the terms of the transaction with the Catholic and to welcoming the Catholic's members into the Chelsea family in due course."

Consolidation within the building society sector has been on the cards for some time, experts say, largely as a result of the credit crunch and regulation which is making life harder - and more expensive - for smaller players.

David Black, a banking consultant for data provider Defaqto, says: "The costs and time taken to comply with all the various regulations are particularly onerous for smaller institutions. For this reason I fully expect to see further consolidations within the building society industry as considerable economies of scale can be achieved."

The Chelsea Building Society is itself a result of several building society mergers, including The Camberwell and South London Building Society, founded 1875, and The Borough of Chelsea Permanent Building Society, founded 1989. These two mutuals merged in 1966, becoming known as The Chelsea Building Society, and later incorporated the City of London Building Society.

The society has made no secret of its desire to merge with other players in the mutual market. It attempted to merge with the Lambeth Building Society but lost out to Portman, which itself later merged with Nationwide.