Making waves?

This week saw the long anticipated completion by Nationwide Building Society of its merger with Portman Building Society. The new entity officially came into being on 28 August, following discussions that had been ongoing for around a year, and became the second largest retail mortgage lender in the UK; second only to HBOS.

With assets in excess of £160 billion and around 13 million members, Nationwide now towers over the majority of lenders in the mortgage industry and is by far the biggest player in the building society sector. The key issue stemming from the merger is that a ‘super lender’ has been created, yet it remains as a building society that is owned by its members. What will this mean for the rest of the industry?

Good news

The perceived dominance of Nationwide is not being frowned upon. The Building Societies Association (BSA) claims that it is a positive move for the country and borrowers. Rachel Le Brocq, press and public affairs officer at the BSA, says: “It is good news for the sector as personal finance will benefit from a large powerful mutual and it will offer a challenge to the large identikit banks. It will not take away any characteristics from local building societies or undermine them, but will offer something different in the marketplace – but not undermine smaller lenders.”

The merger means that there are now over 900 high street outlets, with Nationwide assuming control of Portman’s branches across the South of England.

Despite the end of Portman as an identity, its specialist lending brand The Mortgage Works, alongside Nationwide’s UCB Home Loans, are being retained in a dual strategy for intermediaries, to offer them a wider choice of products and services. Around 75 branches have been closed, mostly in cities where both a Portman and a Nationwide outlet existed and there were not enough customers to sustain both.

Sue Knight, spokesperson for Nationwide, says: “From now, Portman ceases to exist. All Portman mortgage holders will come to us and will be contacted at the end of their term with options from Nationwide. We remain as the largest building society to be solely owned and run by our members, and we can now offer better products, pricing and service.”

Graham Beale, Nationwide’s chief executive, believes: “This marks the start of an exciting new chapter in Nationwide’s history. The completion of our merger with Portman is a major step forward for us and will underpin our future success. I’m pleased to welcome Portman’s members and employees to Nationwide. Together we will use our combined strength and size to build an even stronger member-owned society. We will deliver real value to our increased membership through better product pricing and service and continue to provide a compelling alternative to the big retail banks.”


Whether this impacts upon other lenders or not is beside the point. After all, this creates competition with such a major company now operating in the mortgage lending sector. But the fact it remains a building society will mean a mutual ethos is in place, aiming to see that members who will benefit the most.

So what impact does this have upon other lenders? Firstly this could point to UK lenders coming under threat from a major company in the near future, as smaller lenders may feel that the takeover of a fairly prominent building society could lead to further takeovers and mergers. A story in last week’s issue of Mortgage Introducer claimed that larger lenders were looking to take over smaller specialist firms, as they look for funding and find the specialised market more pressured.

Following added competition from lenders changing their rates in anticipation of a reduction in the Bank Base Rate, together with funding issues, has led to some specialist lenders apparently struggling to survive.

Andy Pratt, chief operating officer at Alexander Hall, claims that many lenders are struggling for funding and a lot of companies are looking for secure capital. He believes that this will lead to further mergers and acquisitions, as, in his own words, ‘when the going gets tough, the tough get going’.

Bolstering the sector

However the merger does seriously bolster the building society sector, so plenty of credibility will be given to the financial services industry after the recent uncertainty. It will also strengthen consumers’ appetite for home ownership and the financial aspects of the merger will add confidence to new buyers.

Roger Morris, managing director of em–, comments: “The merger of Portman with Nationwide is even more significant to the UK mortgage market than first thought and will certainly have a positive effect on the UK mortgage market. The association has established the formation of one of the country’s largest balance sheet lenders, which will add further value to the marketplace.

Due to the turbulence we have seen in the US non-conforming market, the importance of this merger is now even more apparent. I’m confident that it will be able to develop The Mortgage Works into a major force within the UK non-conforming market.”

Naturally the real results of the impact of the merger will be seen in time. Nationwide is a well-known high-street brand to consumers and popular among brokers, and only time will tell if this ‘super lender’ will make huge waves in the industry.

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