Outlook: Why Abbey's Mr Birch takes a lot of beating
Friday 27 February 1998
Abbey was the first building society to convert to a plc and float on the stock market. At the time, virtually all the others including the mighty Halifax, poo-pooed Abbey's trail blazing experiment, arguing that long term the customer would be squeezed by the demands of shareholders. But one by one they've followed suit. Only the Nationwide and a few also rans now cling to the mutual tradition.
You can argue until the cows come home about which structure of ownership is best for the customer. As you might expect, Mr Birch makes a compelling case for the joint stock company. But one thing is certain; the Abbey conversion has been outstandingly good for those customers who hung onto their share allocation. In the eight years from conversion to the end of last year, shareholders recorded a total return of 1157 per cent taking account of the movement of the share price and gross dividends over that time. That makes it the best performing share in the FTSE 100.
This is not all down to Mr Birch, of course. In large measure it is due to the fact that when Abbey floated, the stock market had no proper appreciation of how much a building society might be worth. It is also down to the market's general love affair with the banking sector. But Mr Birch has played his part with good management and well chosen acquisitions. His successor, Ian Harley, says he wants to emulate Mr Birch's achievements. We all wish him well, but it's hard to see how he can.
Indeed, it is Mr Harley's unfortunate lot that however hard he works and however successful he is in his management, his reign is much more likely to see a period of share price underperformance than a continuation of the heady gains of the Birch years. Without another round of far reaching consolidation, which ministers and regulators are hostile towards, the boom in bank shares cannot be expected to continue. Mr Birch is going to be an impossible act for Mr Harley to follow. The same will be true for whoever steps into Sir Brian Pitman's shoes too.
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