Midshires to set up charity fund

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The Independent Online
Birmingham Midshires, the hottest tip to be the next building society to announce a windfall for customers, is considering setting up a charitable foundation, boosting donations to more than pounds 1m a year. The revelation is likely to rekindle speculation about the society's future.

The programme could make Midshires one of the biggest supporters of charities and community projects in its catchment area of the Midlands, Liverpool and the South-west and among building societies generally.

The figure of pounds 1m-plus compares with just pounds 51,000 that the society gave last year, a similar figure to a number of other medium-sized societies. The Halifax gave pounds 1.9m.

The society said its new community investment strategy, which could cost up to 2 per cent of pre-tax profits a year, was aimed at building customer loyalty as well as showing itself as a caring corporate citizen.

But analysts speculated that the proposals meant more and put forward three possibilities: they are a precursor to flotation; a way of encouraging any predator to keep the Midshires brand and branch network; or a way of softening the blow to members and local community of a predator closing down the society.

The society's board will decide on the level of funding this autumn and choose between setting up a charitable foundation or joining the PerCent Club, a group of businesses that donates at least 0.5 per cent of their pre-tax profits to good causes. The society denied that the thinking behind any charitable foundation was to use it as a "poison pill" against future predators.

As part of its conversion from mutual status earlier this year, Northern Rock proposed a charitable foundation holding voting rights over 15 per cent of the would-be bank's shares.

Officially, Midshires says it is committed to mutuality, but insiders admit the society is keeping its options open. Analysts believes its primary wish is to be bought by a bank, but to be kept as a stand-alone mortgage subsidiary, like Lloyd's TSB's Cheltenham & Gloucester.

Unlike rivals, Midshires has not launched a mutual benefits package aimed at emphasising to members the value of it remaining a building society.

But it said its community strategy, which would come in next year, would be a "modern-day expression of a building society's roots". The programme would focus on social projects in the society's catchment area.

A spokeswoman for Business in the Community, the charity which runs the PerCent Club, said a community programme worth in excess of pounds 1m a year was significant. The biggest giver last year, BT, had a programme worth pounds 15m.