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Last Updated: Monday, 6 March 2006, 11:22 GMT
Portman to take over the Lambeth
Portman branch
The Portman will cement its 3rd place position.
Portman, the UK's third-largest building society, has agreed to buy smaller rival Lambeth.

The deal still needs to be approved by Lambeth's 70,000 members, who are set to receive a windfall bonus of at least 400 each if they give the go ahead.

Lambeth is the UK's twentieth largest building society, with nine branches in southern England.

Portman says there will be no forced job losses among Lambeth's 130 staff, though two branches will have to shut.

Although it is a takeover of the Lambeth by its larger rival, a spokeswoman for the Portman argued that it was in reality a friendly merger as the directors of the Lambeth had made the first approach.

And Robert Sharpe, chief executive of the Portman, said the enlarged society would remain a mutual, owned by its members.

"We are delighted that Lambeth has chosen Portman as its merger partner.

"Whilst there is no doubt that small and medium-sized building societies are able to trade profitably, we all operate in an increasingly challenging market environment.

"The enlarged society's economies of scale and wider distribution will generate tangible benefits in terms of products and pricing" he added.

Remaining societies

Should the deal go ahead it will mean there are just 61 building societies left, with only the Nationwide as a large, national, mortgage and savings institution.

Twenty years ago there were 151 societies and many have disappeared through mergers.

Earlier this year, the joining together of the Leeds and the Mercantile was announced.

But it was the frenzy of demutualisation in the mid and late 90s that produced the rapid shrinkage of the assets of building societies as the biggest changed their status to become banks.

That trend was initiated by the Abbey National, which floated on the stock exchange and became a bank in 1989.

Between 1995 and 2000 nine more societies became Plcs or were taken over by existing banks.

Among them were the Cheltenham & Gloucester, Alliance & Leicester, the Halifax, Woolwich, the Northern Rock and most recently, in 2000, the Bradford & Bingley.

Merger details

Both borrowers and savers with the Lambeth will be entitled to vote on the proposed merger and will be eligible for a windfall bonus.

Full details will be posted towards the end of April.

Windfalls will be paid to those savers who had at least 100 in a savings account on 31st January, and to borrowers who had a mortgage of at least 100 on that date.

However, they will have to have kept those accounts open until a date in the near future - which has still to be decided - while the merger process is finalised.

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