The society, which announced that its stock market flotation was provisionally set for 21 April, spent a total of pounds 143m on all forms of mortgage incentives during the year.
But roughly two-thirds of this was the continuing cost of mortgage deals agreed in previous years where the discounts were still in force. The balance was the cost of cash-backs and discounts required to win new business during the 1996 price war.
A&L said it had chosen not to follow the very aggressive pricing adopted by many competitors in the first half of the year, "preferring to maintain profitability rather than buy market share''. Gross mortgage lending for 1996 fell from pounds 2.9bn to pounds 2.2bn in a growing market.
However by the fourth quarter the price war had eased and A&L's market share began to recover. For the year as a whole it averaged 3.1 per cent but in the fourth quarter it rose to 3.5 per cent. This compares with 5.2 per cent for the whole of 1995.
A&L's policy is to write off the cost of discounts over the periods for which they are in force, rather than the policy of some other societies of spreading them over the average life of a mortgage. Peter White, the chief executive, said this was "prudent" compared with many other UK mortgage lenders.
Analysts believe the planned conversion to a bank will bring a windfall of approaching pounds 1,100 each to members. The society said the conversion project cost pounds 26m in administrative expenses during 1996.
This cost includes transfer documents for more than 3 million members, and the expenses of the meeting in December at which members approved the proposal. There was also a supplementary depreciation charge on property of pounds 27m.
Profit before tax was pounds 306m, a rise of 6 per cent, but the underlying change before conversion costs and other exceptional items was a 10 per cent rise to pounds 359m operating profit.