Alliance & Leicester to go public with pounds 3bn flotation shares

Alliance & Leicester, the UK's third-largest building society, is planning a pounds 3bn flotation on the stockmarket, and will announce its intended conversion to bank status at the end of the year.

According to sources yesterday, Alliance's chief executive Peter White is keen to take advantage of its Girobank subsidiary's existing Bank of England banking licence. Conversion will unlock the society's reserves of pounds 1.4bn to be shared out among 2.5 million members, giving an average possible windfall of around pounds 500. The society is using American investment bank JP Morgan to handle the deal. Flotation will put Alliance at around 60 in the FT-SE 100-share index.

The Woolwich, the UK's second biggest society, is also understood to be planning a flotation, despite denying it officially last week.

Alliance's official stance was reiterated yesterday by a spokeswoman : "We never comment on speculation and have said on a number of occasions that we are keeping our options open." However, City sources said recent rumours of a merger between Alliance and Scottish Amicable, the life insurer, had missed the point. Alliance is in the process of severing its six-year- old links with Scottish Amicable and launching its own life and general insurance operations - both of which will be administered by Scottish Amicable. This did not necessarily involve a merger, said the sources. Scottish Amicable denied over the weekend that a merger was afoot.

Alliance's thinking is that it already makes 40 per cent of profits from non-traditional business like Girobank, and needs to convert to raise cheap funds via money markets. It also concluded that, while a merger with a northern-based society would be desirable before conversion to gain critical mass, remaining societies either do not want to convert or want to be top dog in any merger. Over 40 per cent of the mutual sector has been lost, with the Halifax and Leeds merging and floating, and Cheltenham & Gloucester selling up Lloyds.

However, Abbey National's successful hostile bid for National & Provincial earlier this year has created a precedent. Alliance thinks it can float and then launch bids for any remaining societies it wants, whether their managements like it or not. Alliance has nearly 400 branches and nearly 6,000 staff. It made interim profits this year of pounds 163m on total assets of pounds 22bn, compared to Woolwich's pounds 141.8m on assets up 25 per cent. Alliance lifted its share of the mortgage market from 5 per cent in 1993 to 7.5 per cent last year.

The society has big non-traditional subsidiaries; A&L Personal Finance and Girobank, which processes pounds 1 in every pounds 4 of cash and cheques passed through a UK till. Together these businesses contributed over pounds 100m to group profits last year. Analysts are worried, however, by the society's relatively high cost base. Last year costs went up 4 per cent while income grew 2 per cent.

The Woolwich already appears to be reducing costs as part of its run- up to flotation. Last week it posted notices in branches that said that it was seeking to reduce its 7,000 head count by 10 per cent, and asked for volunteers for redundancy.

Yesterday the Woolwich issued a statement confirming that notices had gone up, but that they had not contained numbers of volunteers required. It said natural wastage, redeployment and early retirement would not be enough "to deliver savings quickly enough to meet our targeted requirements for next year". But it added that "It is sheer speculation to link this request with speculative stories in the media concerning the future of the society."

Comment, page 19

Remaining societies

Society Price (pounds m)

Nationwide 3527

Woolwich 2670

Bradford & Bingley 1352

Britannia 929

Northern Rock 802

Yorkshire 675

Bristol & West 598

Prices calculated on same basis as Abbey National bid for N&P

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Arts and Entertainment
JK Rowling will not be releasing a 'romance' novel anytime soon
books
Life and Style
tech

Of all the computers Apple has ever made there’s only one that Steve Jobs had to sell his car to finance

Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidates on the verge of tears as they were ejected from the boardroom
News
One of the 'princesses' in the video
videoYouTube reinstates sweary video after takedown for 'violating terms'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?