Newcastle, the UK’s 10th biggest building society, is at an advanced stage of takeover talks with rival Skipton and if the project is through it would form a £21 billion mutual with over 1.1 million people. Skipton and Newcastle would be then be a strong financial force to reckon with. Only Britannia and Nationwide after being taken into the Co-op would be larger in terms of assets.
Newcastle is recovering from a terrible 2008 which experienced a loss of £35.7 million because of revelation to failed Icelandic banks.
Skipton readily agreed to give £10 million to Newcastle by providing support to interest bearing shares.
But the problems of the society were still existent. Credit ratings companies remained worried about Newcastle’s condition. Last month, Fitch demoted Newcastle because of growing alarm over the standard of its business loan book.
Though Skipton was also demoted by Fitch, yet it is still in better condition than Newcastle and is considered by the FSA as one of the powerful building societies.
Profits of Skipton were £22.5 million last year and it also tookover Scarborough, another troubled mutual.