Shares in new banks surge as Woolwich announces buy-back

MILLIONS of shareholders in the converted building societies enjoyed a mini-windfall yesterday as share prices in the sector surged on news of a share buy-back from Woolwich.

Shares in Woolwich jumped 6.5 per cent to 395p after the recently floated bank said it would spend up to pounds 300m giving capital back to shareholders via a buy-back and special dividend.

Alliance & Leicester rose 49.5p to 955.5p, Halifax was up 21.5p at 940p while Abbey National added 41p to 1,285p as about pounds 1.6bn was added to the value of the companies.

Shareholders with Woolwich will be paid a special dividend of 6.5p per share on top of the 9.5p per share for 1997. People who have kept their windfall shares stand to gain pounds 105 each from dividends alone. Woolwich also announced a rise in profits and said it was seeking permission to spend up to pounds 200m extra on a share buy-back.

Woolwich shares have risen sharply in the last three months on the back of speculation that the group will be taken over by an insurance company or merged with another bank.

However, City analysts yesterday said the share price was being propped up by vague merger speculation. Jeremy Batstone, head of research at NatWest Stockbrokers, said shareholders should get ready to sell. "They have been lacklustre since their launch and only recently have investors seen any kind of performance from their shares. Better value exists elsewhere in the sector."

John Stewart, chief executive, yesterday confirmed the bank was still interested in mergers or joint ventures. However, he in effect ruled out the possibility that the bank would make an acquisition, saying prices were too high.

"It would be very difficult to do anything on the acquisition front that would add to shareholder value," he said. "While values are high as they are, in the UK, we will be looking for development by means of things like joint ventures and mergers."

Woolwich saw pre-tax profits rise by 16 per cent to pounds 455.7m last year. But the cost of converting to a bank subtracted pounds 53.3m from the figure.

Since the bank's conversion last July, savers have withdrawn pounds 595m, a reversal of the "carpetbagger effect" in 1996 which saw pounds 696m flow in. Its share of the mortgage market has dropped from 7.5 to 3.1 per cent.

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