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Mergers of Nationwide with The Derbyshire and The Cheshire Building Societies

Nationwide Building Society today announces that it will merge with The Derbyshire Building Society and The Cheshire Building Society, who will transfer into the Nationwide Group by way of two separate transactions. These are prudent and pre-emptive actions taken independently by the Boards of The Derbyshire and The Cheshire following the identification of financial issues faced by both Societies. The transactions represent an important step in maintaining a strong mutual sector in the UK, with Nationwide’s pre-eminent position and financial strength providing a solid foundation for the future.

These transactions bring The Derbyshire and The Cheshire’s combined circa 925,000 members the benefits and security of membership of Nationwide, the UK’s largest building society, and create a society with assets totalling more than £191 billion and £122 billion of retail deposits.

Summary of Transactions
Both The Derbyshire and The Cheshire separately and independently approached Nationwide as a prudent measure to ensure the financial strength and stability of each Society The Derbyshire has assets of £7.1 billion, 50 branches and 485,000 members. It expects to report an unaudited pre tax loss of £17 million for the half year to 30 June 2008 arising predominantly in its near-prime, sub-prime and commercial loan portfolios. These represent material financial uncertainties for The Derbyshire particularly in the current economic climate The Cheshire has assets of £4.9 billion, 45 branches and over 440,000* members. It expects to incur an unaudited pre-tax loss of £10.5 million for the half year to 30 June 2008 due to an exceptional £11.5 million impairment charge on a single secured commercial loan Nationwide has satisfied itself that The Derbyshire and The Cheshire’s general reserves are sufficient to cover conservative fair value adjustments including current and expected future losses Nationwide’s capital ratios are robust and well in excess of its peers, with Core Tier 1 at 8.1%; Total Tier 1 at 9.7%; and Total Capital at 12.4% as at 4 April 2008. These ratios are all forecast to increase during the current financial year as a result of retained trading profits and after allowing for the two mergers

The mergers are to be concluded by way of separate Board resolutions of The Derbyshire, The Cheshire and Nationwide without the requirement for a member vote at a general meeting of any of the societies In order to preserve capital within the enlarged Nationwide for the benefit of its combined membership there will be no distribution to The Derbyshire or The Cheshire members Nationwide recognises the strengths of The Derbyshire’s and The Cheshire’s local franchises and will retain their brands and branch networks An Instrument of Transfer has been agreed with The Derbyshire and Heads of Terms have been agreed with The Cheshire

The transaction with The Derbyshire is expected to conclude on 1 December 2008. The transaction with The Cheshire is expected to conclude before the end of the calendar year. Both transactions are subject to confirmation by the FSA and approval by the Office of Fair Trading (OFT).


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