Bid fears dismissed by Northern Rock

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The Independent Online
Northern Rock, the only building society currently seeking a stock market flotation, said yesterday it was confident of remaining independent as it confirmed the timetable for its 1 October deadline to convert to a bank.

The Newcastle-based building society dismissed talk of a pre-flotation bid as it announced a strong rise in profits for the six months to June, its last results announcement before it becomes a bank.

Leo Finn, managing director at Northern Rock, said: "We believe there is nobody that can run this business better than we can. There just aren't the cost savings available to make a bid worthwhile."

Mr Finn's comments came as Nationwide Building Society announced that its members had given the brush-off to the Michael Hardern-lead rebels, who were campaigning on a platform of immediate conversion to a publicly- quoted company.

Meanwhile, Birmingham Midshires Building Society restated its ambivalent stance towards mutuality.

Mike Jackson, the Wolverhampton-based society's chief executive said: "Clearly, the butler [Mr Hardern] didn't do it and the Nationwide membership have given a ringing endorsement to its mutual stance and we are pleased for the board."

Midshires was forced earlier this week to close its doors to all new accounts after being inundated with applications from potential carpetbaggers hoping to gain from a flotation or a takeover.

Mr Jackson added: "We shall wait for a few days to see if the frenzy dies down about speculator activity. Our share account openings remain suspended. We have been consistent in never saying `never' to anything and the board will continue to consider all the options available to itself." He added that the society was not for sale.

The smallest of the summer's financial flotations, Northern Rock forecast in its transfer document a market value of between pounds 1.17bn and pounds 1.33bn, which would leave it outside the FTSE 100 index. The other converting societies easily outstripped early expectations, however, so the outcome could be much higher.

But Mr Finn played down expectations that the society would use its new status to make acquisitions itself - doing so would involve waiving its own protection against takeover, which would only make sense in return for a very large deal.

Northern Rock, primarily a mortgage lender and deposit taker, said yesterday it had no intention in the short run of diversifying beyond its core activities.

Interim figures released yesterday showed a 10 per cent rise in pre- tax profits to pounds 97m after a reduction in the society's cost to income ratio. Net retail receipts were 75 per cent higher at pounds 531m.

Mr Finn said: "I am pleased to announce another very good set of results for Northern Rock. The strong financial performance was very much in keeping with our tradition of strong profit and asset growth and falling unit costs."

The society claims a 7 per cent share of net new mortgage lending - pounds 794m - around 2.5 times the amount that could be considered to be its "natural" share. Northern Rock's assets rose 13.6 per cent during the period to pounds 14.6bn.