Banking boom boosts Halifax share handout

Millions of Halifax members are set for a much bigger windfall than they had been led to expect when the country's biggest building society floats on the stock market in a week's time. If City predictions of the price at which Halifax shares will end their first day's dealings are accurate, someone getting the minimum handout can look forward to shares worth pounds 1,400.

According to one of the City's spread betting organisations, IG Index, Halifax shares will be worth 700p at close of play on Monday 2 June, the first day of trading. Anyone with both a savings account and a mortgage with Halifax will have shares worth at least pounds 2,800 and possibly much more, depending on the level of funds in their account.

That prediction is well ahead of the range originally suggested by Halifax when it announced details of its flotation and told its 8 million members their shares might be worth between 395p and 450p. The increase means the minimum handout, which two-thirds of members will receive, is more than pounds 500 higher than expected.

Halifax received the official go-ahead for the float yesterday as the Building Societies Commission confirmed the transfer of the business of the Halifax Building Society to Halifax plc. Assuming authorisation is obtained from the Bank of England, the shares will start trading in nine days' time, entering the FTSE 100 index three weeks later.

Analysts said yesterday the short delay before Halifax enters the index was one factor in the rapid increase in expectations for the price. Big institutional investors are expected to scramble for shares in early dealings in order to maintain their weighting in the banks sector.

They will get their first chance to buy shares next Friday when, as with the Alliance & Leicester, an auction will be held of the shares that members have already indicated they wish to cash in immediately.

The technical squeeze is one of the main factors driving expectations, but part of the rise, analysts say, is attributable to the underlying strength of the whole sector. Bank shares have soared over the past 12 months in the most benign environment for financial stocks in years.

Lloyds TSB shares, which closed last night at 618p, near to an all-time high, have more than doubled in 12 months. Four years ago they were worth 122p. Barclays, pounds 12.29 last night, were only 751p a year ago. Abbey National has enjoyed the run, and Alliance & Leicester, up 37p yesterday to 636p, is more than 100p higher than its low point a month ago.

Banks are enjoying buoyant trading conditions and analysts said yesterday they were anticipating raising their forecasts across the sector as the summer progresses. The continuing consumer boom and the recovering housing market are providing plenty of lending opportunities, improving the banks' product mix and offsetting some of the competitive pressures on margins.

All the banks are currently in the process of slashing their cost bases, thanks to a reduction in their expensive branch networks and a move to cheaper telephone and PC-based delivery systems as well as alternative physical methods such as supermarket banking. With the UK still well behind the US in this regard, the cost-cutting process has a way to go.

As a result of buoyant trading and cost-cutting, all the banks are faced with an embarrassment of surplus capital. Dividend growth has vastly outpaced the rest of the market and some banks, such as Barclays and NatWest, have opted to return even more to shareholders via share buybacks. That trend is also expected to continue.

The final positive for the banks has been the rise in sterling in recent months, which has hit exporting companies so hard but left the banks, which are predominantly domestic businesses, looking relatively attractive.

Whether the Halifax shares hang on to their early gains will depend partly on the number of shareholders who cannot resist the temptation to cash in their early gains. Just over a quarter of the Alliance & Leicester's shares were sold immediately, but partly because of the performance of A&L's shares more Halifax shares are expected to be tucked away as a long- term investment.

Shares windfall, Long Weekend, pages 27-30

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace