Woolwich's move raises stakes for smaller rivals

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The Independent Online
NIC CICUTTI

Woolwich Building Society's move to abandon mutual status to become a bank increased the pressure yesterday on several of its larger rivals to do the same.

It also dramatically raised the stakes for a number of other, smaller, societies facing the possibility of hostile takeover bids by financial institutions buying a share in the mortgage market.

At least two societies, Alliance & Leicester and Nationwide, are known to have considered floating on the Stock Exchange. Nationwide is believed to have backed away from this option, while an announcement from Alliance & Leicester is imminent.

Bradford & Bingley and Bristol & West yesterday repeated their continued backing for mutual status.

Woolwich Building Society, founded in 1847, is the third-largest in the UK, with assets of about pounds 28bn.

The society has several subsidiaries, including insurance, investments and pensions, plus a 180-strong estate agency chain. Profits in the year to December 1994 stood at pounds 302m.

Its decision to de-mutualise follows that of Halifax, which has merged with Leeds Permanent.

The society's chief executive, Peter Robinson, said: "Powerful forces for change are producing an intensity of competition that, through consolidation, will polarise the industry into well-defined groups of large and niche players.

"The Woolwich is not a niche player and has no intention of allowing itself to be overtaken by events. As larger groupings form in our market place, the competitive threat is obvious."

Sir Brian Jenkins, Woolwich chairman, added: "The financial services industry is changing. We need the most effective corporate structure to achieve our business objectives."

A stock market listing will, its directors believe, allow Woolwich to boost its presence in several overseas countries, finance takeovers of other financial institutions and expand existing operations.

Rob Thomas, building society analyst at the Swiss banking group UBS, said: "This move is a logical extension of what has happened to other big societies.

"Remaining ones, particularly Nationwide, will have to respond by giving back more money to their members by, say, loyalty bonuses, or giving better rates."

IBCA, the European rating agency, yesterday affirmed Woolwich's long- term rating of AA minus and its short-term A1 plus rating.

But some banking analysts questioned whether Woolwich, with a market capitalisation of about pounds 3bn, would be big enough to attract much institutional interest.

Tim Clarke, an analyst at Panmure Gordon, said investors would do better with the much larger Halifax flotation. "It is difficult to see what Woolwich can bring to the party. I would have been more excited if it was Alliance & Leicester or Nationwide," Mr Clarke added.

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