The Nationwide and Portman building societies have announced that they intend to merge, creating the UK's second-largest mortgage lender.
Nationwide says the deal is a merger not a takeover
The merged group will have more than 800 branches across the UK and more than 13 million members.
The deal will also mean windfalls for many of the Portman's 1.8 million members of at least £200.
However, Nationwide chief executive Philip Williamson told the BBC that the merger would mean some job losses.
He said it was too early to give an exact figure, but that the aim was for any compulsory redundancies to be kept to a minimum.
Nationwide is currently the UK's largest building society, while Portman is the third biggest.
The merged business will take the Nationwide name, with the deal expected to be completed by September 2007.
The societies said the new body - which will have assets of more than £150bn - would continue as a mutual society, owned and run for the benefit of its members.
Mr Williamson said the deal was definitely a merger rather than his company taking over the smaller Portman.
Nationwide - 680 branches
Portman - 143 outlets
Nationwide - 16,000 staff
Portman - 2,500 workers
He said both firms realised they needed to be bigger to better complete in a competitive marketplace.
"We feel the same way that the market place is not going to get any easier," he said.
"Joining together gives us a lot of synergies, such as being able to borrow at a cheaper rate and some cost savings."
Qualifying members of the Portman are set to receive a merger bonus of "at least" £200, the society said.
The Portman name is to disappear
The money represents the distribution of more than 70% of Portman's general reserves, which will be released from the new body's combined reserves.
To be eligible, Portman members with savings will have had to have held at least £100 in their account on 11 September 2006, and remain a member until a future date, which has yet to be specified.
Portman mortgage holders will have had to have held a minimum balance of £100 on 11 September 2006.
Members with both savings and a mortgage with the Portman will be eligible for two merger bonuses.
Nationwide members will not receive a merger bonus.
The Nationwide's existing head office in Swindon will become the head office of the enlarged society.
Portman's current head office in Bournemouth will become "a key business centre within the enlarged society and will remain a significant employer in that region".
Nationwide's group finance director, Graham Beale, is due to replace Mr Williamson as chief executive of Nationwide next April.
He will then take up the top position of the combined group following the completion of the merger.