Woolwich ponders switch to bank

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JWoolwich Building Society, Britain's third-largest society, is considering conversion to a bank, with the option of then merging with another newly-converted society.

Woolwich spokesmen were at pains yesterday to stress that no final decisions had been made on the society's new strategy. But sources close to the society confirmed that plans were afoot to convert in two years, valuing the society at pounds 3bn. Its 3 million voting members could receive an average of up to pounds 1,000 each in shares.

Woolwich has not found a partner yet, but a northern-based society would make most sense, analysts said yesterday. The City's rule of thumb is that any society would have to have minimum total assets of around pounds 35bn to survive independently as a bank. The Woolwich's total assets are pounds 26bn. This is the logic that drove Halifax to merge with Leeds this year as a prelude to conversion in about 18 months.

Possible partners for Woolwich include Britannia, Northern Rock and Yorkshire. All three denied any such plans.

Some employees at Woolwich are already worried that the new chief executive, Peter Robinson, who replaces Donald Kirkham this year, will sell or close down a series of subsidiaries next year, as a preliminary to conversion.

Woolwich's estate agency chain, its independent financial services arm, the building division Woolwich Homes and the European off-shore operations are all under threat, according to employees.

Woolwich has already slimmed its estate agency chain from 250 offices to 120. The society officially denied the suggestions yesterday, saying "We are not planning a flotation. This is sheer speculation."

A spokesman said that the board was actively considering four possible strategies: stay the same, merge and possibly convert with another society, sell up to a third party such as a bank, or convert on its own.

"The board have made no decisions yet. It will take until the end of the year or even next year [to finalise the decision]. We are open-minded on our status. It's just our turn this week for the rumour-mongers."

Sources close to Woolwich said that, although compli- cated, a new scheme of conversion and then merger would appeal, since everything would happen at the same time.

Societies to watch

Society Price (pounds m) on same basis as N&P

Nationwide 3527

Woolwich 2670

Alliance & Leicester 2219

Bradford & Bingley 1352

Britannia 929

Northern Rock 802

Yorkshire 675

Bristol & West 598