Dunfermline Building Society up for auction

by Gill Montia

Story link: Dunfermline Building Society up for auction

Dunfermline Building Society has collapsed.

Prime Minister Gordon Brown has reassured savers that their deposits are safe and what remains of the 140-year-old institution is to be sold.

The society operates through 34 branches plus a number of agencies, employing around 500 staff.

It has over 250,000 savers and 35,000 borrowers and a savings book of £2 billion.

According to a report in The Sunday Times, Santander, which bought Bradford & Bingley’s savings book last year, is a potential bidder as are National Australia Bank and Bank of Ireland.

Nationwide, Yorkshire and Skipton building societies could also show an interest.

Dunfermline’s commercial loan book and problems with its IT business are largely responsible for an estimated £26 million loss in 2008.

Reports that the society was in trouble emerged last week when a bail-out of the lender was on the cards but the Treasury was not prepared to commit up to £100 million of taxpayer money to the cause.

The UK’s mutuals have, generally speaking, weathered the credit crisis well because their lending has been cautious and funded by customer deposits, rather than money market borrowing.

However, a number of small societies have been rescued by their larger rivals.

Cheshire and Derbyshire building societies have been folded into Nationwide; Scarborough and Skipton are merging, after reporting that difficult trading conditions will have a substantial impact on profits.

Meanwhile, Britannia Building Society is forging ahead with plans to merge with Co-operative Financial Services.