The Investment Column: Woolwich

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The Independent Online

IF YOU'RE with the should you stick with it? Now its half-year results are in, all of the building societies who have turned themselves into banks have reported. Each has seen its share price fall irrespective of whether the numbers where better or worse than the City scribblers had predicted. was no exception. Its shares fell 24.5p to 333p after delivering profits which, at pounds 250.3m, were at the lower end of analysts' expectations. Given that the stock market as a whole had a bad day yesterday, the fall was not as bad as it looked.

The City seems to believe that mortgage banks as a breed are doomed to extinction, and the reported numbers have done little to convince them otherwise. Investors, however, should focus on what distinguishes the banks rather than what they have in common.

While the challenges the mortgage banks face are broadly similar, the ways they are proposing to meet them are radically different. John Stewart, the 's canny chief executive, says the way to tackle the threat posed by the likes of Egg and Standard Life is by being technologically superior. Information technology, he believes, is a powerful tool in helping understand its customers better, deliver new products, and process them cheaper. It is a long-term strategy that will take time to pay off.

In the meantime, Mr Stewart has made it clear he is open to the idea of a merger. The shares have already fallen pounds 1 from their June high of 429.25p. Robert Fleming is holding to its full-year profits forecast of pounds 537m, putting the stock on a prospective p/e ratio of 14.3. That's demanding compared with Halifax, but the possibility of a bid and the long-term strategy make the stock a buy.