Nationwide today confirmed that it is taking over the Derbyshire and the Cheshire building societies, two smaller rivals which have been forced into loss by the credit crunch.

However, the need to shore up the balance sheets of the two societies means their 925,000 members will not receive a windfall. Neither will they be able to vote on the deal.

Nationwide described the tie-ups as “prudent and pre-emptive actions taken independently”, following the identification of “financial issues” at both societies.

Derbyshire, which, with £7.1 billion of assets, is the larger of the two, said it had made a loss of £17 million in the six months to June 30, “with the potential for further future losses”.

The society, which had initiated a strategic review following the apppointment of a new chief executive in February, pinned the losses on credit defaults in its near-prime and sub-prime residential mortgage portfolios and commercial loan portfolio.

It had bought books of commercial and sub-prime loans from GMAC and Kensington in the past few years.

The Cheshire made a pre-tax profit of £1 million for the year to June 30 but has been forced to take an exceptional impairment charge of £11.5 million against a single commercial loan in its current financial year.

Graham Beale, chief executive at Nationwide, said his society “is in a unique position because of its size and financial strength to provide support, and we regard it as both responsible and commercially beneficial to undertake these mergers.”

Nationwide, which took over the Portman Building Society last year, has benefited from the so-called flight to quality that occurred after the collapse of Northern Rock. Nationwide took £1 in every £5 saved in the financial year to April 2008, opening 1.5 million new savings accounts.

Today’s deal will create a lender with 925,000 members, assets of £191 billion and £122 billion of retail deposits.

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