Northern Rock windfalls to average pounds 1,000

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The Independent Online
Northern Rock's conversion from a building society to a bank is expected to cost the society pounds 30m and to bring windfalls averaging pounds 1,000 to 1 million members, it emerged yesterday.

Further details of the flotation, which will take place in October, will be known in March when the transfer document outlining the details will be posted to members. They will be asked to vote on the plans at a special general meeting expected to take place in April.

"We are bang on course," said Christopher Sharp, managing director of Northern Rock.

The society yesterday announced record pre-tax profits of pounds 167.5m for 1996, up 14 per cent. Those figures exclude the pounds 10.3m non-recurring cost of the conversion process, although the society admitted the total was likely to rise to about three times as much.

On the basis of profits for 1996, the City is expecting the society to be worth between pounds 1bn and pounds 1.2bn at flotation in the autumn, and only then will members know the precise value of their share handout.

Analysts in the City are concerned that Northern Rock will be too small to survive on its own. For the first five years of its stock market launch it will be protected from takeovers. After that, it could quickly become a bid target.

"When looking in the long run, it's difficult to see an independent life for them," said Rob Thomas, building society analyst at UBS.

Northern Rock has the lowest cost-to-income ratio in the sector at 33.1 per cent at the end of 1996 compared with 33.5 per cent at the end of 1995.

During the year its share of UK mortgage lending rose to 10 per cent from 8 per cent as a result of a 44 per cent rise in lending to pounds 1.9bn. Assets grew 19 per cent to pounds 13.7 bn and net receipts from savers rose to pounds 584m from pounds 560m.

Bristol & West Building Society yesterday posted its transfer document to members about its proposals to sell out to the Bank of Ireland for pounds 600m. Members will be asked to vote on the proposal on 15 April.

Members of Bristol & West will receive payments of at least pounds 250 each. Two-year investing members who had pounds 100 in their accounts on 15 April 1996, when the announcement was first made, will receive a higher distribution of pounds 500 and an additional distribution depending on the size of their balance.