But Moody’s says the merger does involve notable risk in terms of intergrating and managing the operations of Chelsea, particularly as Yorkshire has little experience in managing a buy-to-let portfolio.
In the same rating action, the subordinated debt ratings of Chelsea were placed on review for possible downgrade.
Moody’s said after the merger the society will be bigger in size and scale and will access a broader geographical diversification and the funding position will be solid as Yorkshire is supported by the Treasury’s credit guarantee scheme as well as the Bank of England’s special liquidity scheme.
The ratings agency says: “Furthermore, potential losses arising from Chelsea’s loan book – in addition to those arising from Yorkshire -remain a cause of concern.
“The negative outlook on Yorkshire reflects Moody’s concern on the continuous negative pressure on the asset quality of both societies, as well as integration risks associated with the merger of a much a weaker society into its operations – both of which are likely to result in increased pressure on profitability.”
The combined company would make it the second largest building society in the UK after Nationwide.
The transaction is expected to complete on April 1 2010.