pounds 1.6bn carpetbagger bonanza fears

A building society chief warned yesterday that up to pounds 1.6bn of speculative money could start flowing into the coffers of the remaining mutually owned societies as "carpetbaggers" re-invest their windfalls from earlier flotations.

Mike Jackson, chief executive of Birmingham Midshires, said that 7,000 speculative accounts had been opened with it in the last month alone since bonus allocations were announced for savers with Woolwich and Halifax. He estimates that at least 10 per cent of the 16 million investors with money tied up in converting societies will open speculative accounts with other societies in the hope that they will be the next to convert.

In addition to Halifax and Woolwich, Alliance & Leicester and Northern Rock have also announced bonus allocations, leaving savers free to move their money into different societies.

An estimated pounds 125bn has been tied up in societies that are floating as investors wait to qualify for their windfall bonus. Mr Jackson said that some of this money or the windfall bonuses themselves would be re-invested. If 10 per cent of investors took the opportunity to re-invest in the remaining mutuals then it would mean an inflow of pounds 1.6bn based on an average minimum opening balance of pounds 1,000.

Birmingham Midshires is considering raising its minimum opening balance to deter carpetbaggers. It estimates that 90,000 of the 270,000 new accounts opened with the society last year were speculative, resulting in a pounds 50m inflow.

The society is concerned that a new wave of speculative activity will hamper its ability to attract new customers and harm its existing customer base because of the impact on the the branch network, staffing levels and administration.

Mr Jackson said the industry should brace itself for a renewed wave of speculator activity.