Halifax members bank on scramble for shares

Mike Blackburn, chief executive of Halifax, donned his hard hat over the weekend to help final preparations for the relaunch of Britain's biggest building society as its fourth-largest bank, a giant financial services group with 7.6 million shareholders. Dealings begin today in Halifax shares with analysts still pointing to an opening price in excess of pounds 7 a share, despite the fall in financial stocks at the end of last week.

Members who have chosen to cash in their shares immediately will learn today how much they have been bid for their stock by the big investing institutions which are desperate to grab a slice of the action. Those members will watch from the sidelines as an expected scramble from the giant funds for a weighting in Halifax shares gets under way.

Halifax's flotation has coincided with sharply focused attention on the financial sector, which analysts believe could undergo a radical process of consolidation in the next few years. Over the weekend it emerged that National Westminster Bank and Abbey National had entered merger talks, although these appeared to have foundered at an early stage.

The putative merger would have created a pounds 25bn giant, beefing up NatWest's mortgage and insurance business with Abbey's strong home loans arm, second only to Halifax's, and its substantial presence in insurance, through Scottish Mutual and Abbey National Life.

NatWest, in keeping with its rival Barclays, is facing increasing calls from investors to improve performance, especially in investment banking. NatWest Markets, the merchant banking arm, has absorbed large amounts of its parent's capital but it confirmed worries earlier this year when it announced it had lost pounds 90m on wrongly priced derivatives trades.

The flotation of Halifax is the culmination of an extraordinary few weeks when the expected value of the new bank appeared to rise almost daily on the back of soaring share prices elsewhere in the sector. Average windfalls for members are now expected to exceed pounds 2,300, giving a potentially massive boost to the consumer sector of the economy.

If expectations are proved correct today, Halifax will end its 144-year history as a mutual with a price tag of pounds 18bn. That would put it among the top 10 companies in the country, although still well behind rivals Lloyds TSB (worth more than pounds 30bn) and HSBC, which owns Midland Bank and has a market capitalisation of almost pounds 50bn.

With 20 million customers, pounds 116bn of assets, 20 per cent of the UK residential mortgage market and pounds 1 out of every pounds 6 of cash savings, it will dominate the financial services scene. Attention is already focusing on where it might spend an estimated pounds 3bn of surplus capital, with a bid for Legal & General or a merger with the Prudential doing the rounds.

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