Building societies besieged on float rumours

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The Independent Online
Norwich Union yesterday became the latest windfall bonanza on the stockmarket with nearly two million customers getting free shares worth at least pounds 990.

But while Norwich Union staff celebrated with a special "city lunch", the Nationwide and Coventry building societies were forced to raise the minimum opening balance on many of their savings accounts and to bar new applications after coming under siege from speculators hoping to gain from potential free share windfalls.

Both societies, which have steadfastly declared their commitment to mutuality, said they had been inundated by people wanting to open new accounts.

At the Nationwide, 25,000 new accounts were opened in a single day last week, with some branches running out of passbooks as they tried to cope with a flood of applications from the so-called "carpet-baggers'.

A spokesman claimed yesterday that the large number of new openings were not from windfall speculators but from genuine savers attracted to its highly competitive rates.

"What we are seeing is that the number of accounts we would normally open has doubled in April and May. The amount of money coming in has actually quadrupled, we took in pounds 700m in May alone," he said.

"But a large proportion of the openings is not speculative. For example what we are seeing is the average balance is pounds 10,000 compared to the pounds 500 minimum. A lot of that comes from demutualising societies."

The Nationwide is increasing the minimum balance on certain of its accounts to forestall carpetbaggers. These include the Capital Builder accounts, whose opening balance stood at pounds 1,000, was dropped to pounds 500 in April, but has now been put back to its original figure. Invest Direct has gone up to pounds 2,000.

Coventry Building Society said it had been pushed into halting new openings of MoneyMaker instant access and Bonus regular savings accounts. All other accounts normally available via branch outlets would only be available to customers living within a limited number of Midland postcodes.

Martin Richley, chief executive at the Coventry, said the company regretted having to increase its opening balances. "It cannot be right that our business is being disrupted by speculators who have no regard to the long- term future and seek a quick windfall profit to which they have no moral right whatsoever, which, should they be successful in their ambitions, will be made at the expense of genuine customers."

In the City, Norwich Union shares jumped to an early premium to the 290p strike price of its pounds 2.4bn share offer, netting immediate profits for new shareholders. The shares closed at 324.5p after reaching 356p in early trading. The strong debut for the shares meant that almost three million former members of the life and general insurance group received windfalls worth an average pounds 1,300. Members who received the minimum 300 share handout have a share stake worth just under pounds 1,000.