Nationwide rounds on rebels

If the building society loses its fight to stay mutual, analysts predict a rash of bids for the remaining societies

NATIONWIDE building society will use the announcement of its 1998 earnings on Wednesday to send a clear message to its members: they are benefiting from mutual ownership and should vote to preserve it.

Britain's fourth-largest mortgage lender is holding a vote on whether to maintain mutuality or abandon it through a share issue or takeover. The result will be announced on 23 July.

Nationwide has no shareholders so pays no dividends and can offer lower mortgage and higher deposit rates than banks. Its managers have insisted this is worth more in the long term than the estimated pounds 1,000 to pounds 2,000 members would receive in a share distribution.

"The members clearly have to take a view on whether they want to be part of a society that might give them a price advantage on certain products or whether the members get a windfall," said Lloyds TSB chief executive Peter Ellwood. "What I hope they won't do is get preoccupied with the individuals."

The individual he was chiefly referring to is Michael Hardern, the eccentric freelance butler who stood for the board of directors last year, lost and is running again. Mr Hardern's main demand is that members receive a windfall by converting to a bank, but he and four other pro-conversion candidates garnered only 30 per cent of the votes last year. This year, it is not clear which way the vote will go.

The earnings are likely to reflect the price of mutuality. Last year, pre-tax profit fell 33 per cent to pounds 264.8m because Nationwide narrowed its lending margins by about 30 basis points. The margins have eroded further in the past year so profits are likely to have fallen further. The upside is that the society will probably show it has won a bigger share of the mortgage market.

Analysts are certain that chief executive Brian Davis will say again that Nationwide has reduced its margins in order to benefit its members and that will be lost if they vote against mutual ownership. Nationwide's standard variable mortgage rate is now 8.1 per cent compared with 8.7 per cent at Halifax and Abbey National. The building society has said it will not raise its rates after this week's rate rise unless rivals do.

If members vote against mutuality, bank stocks could soar because Nationwide and other building societies may be taken over and their cut-rate mortgages could disappear. "It could mean you see a bid, and it may put others in the sector in play," said Ian Poulter, an analyst with Williams de Broe. "I don't know which other building societies would be of interest to the banks but there could be bids."

Nationwide members have seen the enticing share performance of building societies that have converted. An estimated 700,000 members will be eligible to vote this year who joined too late to qualify last year. It is thought virtually all joined in search of a windfall.

Furthermore, there are separate voting resolutions this year on the composition of the board and ownership of the society, so members may not be deterred by Mr Hardern's odd behaviour, which some analysts say is the reason he lost so badly last year.

Mr Hardern suggested last year that Nationwide could make all Britons members, then borrow to make a pounds 1,000 pay-out to all of them. That would cost about pounds 60bn. He advocated appointing boxer Frank Bruno or a Spice Girl to the board.

If Nationwide converts or is taken over, analysts expect takeover bids for other mutual lenders such as Bradford & Bingley Building Society and Britannia Building Society.

Copyright IOS & Bloomberg.

PROMOTED VIDEO
Arts and Entertainment
Characters in the new series are based on real people, say its creators, unlike Arya and Clegane the Dog in ‘Game of Thrones’
tv'The Last Kingdom' is based on historical events
News
people
Arts and Entertainment
filmSir Ian McKellen will play retired detective in new film
Life and Style
tech
News
Justin Bieber performing in Paris earlier this year
people
Arts and Entertainment
Martin Freeman and Lauren O'Neil in Jamie Lloyd's Richard III
theatreReview: The monarch's malign magnetism and diabolic effrontery aren’t felt
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
'Molecular Man +1+1+1' by Jonathan Borofsky at Yorkshire Sculpture park
tv
News
Glamour magazine hosts a yoga class with Yogalosophy author Mandy Ingber on June 10, 2013 in New York City.
newsFather Padraig O'Baoill said the exercise was 'unsavoury' in a weekly parish newsletter
Extras
indybest
News
people'She is unstoppable', says Jean Paul Gaultier at Paris show
Sport
Alexis Sanchez and apparently his barber Carlos Moles in Barcelona today
football
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

Financial Accountant-IFRS-Gloucester-£300/day

£250 - £295 per day + competitive: Orgtel: Financial Accountant - IFRS - Glouc...

SharePoint/C# Developer - Aberdeen - Circa £40K + benefits

£30000 - £40000 per annum + excellent benefits: Deerfoot IT Resources Limited:...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

HR Advisor - 6 months FTC Wimbledon, SW London

£35000 - £40000 per annum + Benefits: Ashdown Group: HR Advisor - 6 Months Fix...

Day In a Page

The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests
Howzat! 8 best cricket bats

Howzat! 8 best cricket bats

As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

David Luiz falls from leader figure to symbol of national humiliation

Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil