One Savings Bank and Charter Court Financial Services, which house the Kent Reliance and Precise Mortgage brands, are on course for an all-share £1.6bn merger.
Under the deal, OSB would shareholders would end up with 55 per cent of the combined group, with current OSB chief executive Andy Golding heading it up.
The resulting loan book would come to £15.5bn
A statement reveals that if the merger were to complete, the two current distribution platforms would be maintained.
M&A firm Livingstone director Nick Field comments: “As both OSB and Charter Court have attractive net interest margins around 3 per cent, a track record of good quality growth, and strong positions in specialist products we see this as largely a merger of equals, which is reflected in the all-share deal structure.
“Because both businesses lend across a relatively full range of specialist products and have each invested to develop both retail and wholesale funding capabilities, we would expect operating costs to be the primary area of short-term synergy opportunity.
“As the UK specialist finance market is undoubtedly experiencing some reduction in demand arising from economic uncertainty, consolidation presents a compelling opportunity to deliver incremental profitability independent of market growth.”