Yorkshire and Chelsea warn of job cuts

THE merger of the Yorkshire and Chelsea building societies will lead to job losses and a &pound;200m writedown on Chelsea&rsquo;s bad debts, the two firms said yesterday. <br /><br />More than 3,200 staff work for the two societies which will undergo efficiency savings of &pound;35m.<br /><br />The merger was instigated by Yorkshire after Chelsea was hit hard in the economic downturn.<br /><br />The new society will have assets of &pound;35bn, 2.7m members and a national network of 178 branches.<br /><br />But Yorkshire and Chelsea warned in a joint statement yesterday: &ldquo;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.&rdquo;<br /><br />Chelsea&rsquo;s 700,000 members will receive no windfall under the deal &ndash; which will create the UK&rsquo;s second largest building Society after Nationwide.<br /><br />Yorkshire admitted yesterday that it would have to take a writedown of at least &pound;200m after the completion of the takeover to provide for future losses from Chelsea&rsquo;s existing loans.<br /><br />The merger also hinges on Chelsea&rsquo;s bondholders, who have been asked to write off half of &pound;100m debt and accept the remaining &pound;100m in a contingent capital (CoCo) instrument that converts into equity if the mutual&rsquo;s tier 1 capital ratio falls below a certain level.<br /><br />The merged entity will be known as Yorkshire Building Society &ndash; although the Chelsea brand will be retained &ndash; and will run by Iain Cornish, the present Yorkshire chief executive.<br /><br />He said: &ldquo;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.&rdquo;<br /><br />In the six months to the end of June, Chelsea reported a &pound;26m pre-tax loss and net interest income of &pound;24m. In the same period, Yorkshire posted pre-tax losses of &pound;22m and net interest income of &pound;70m.<br /><br />Chelsea has 35 branches, serving 606,000 savers and 140,700 borrowers.<br /><br />The combined group will follow the traditional building society model.