Alliance investors bank on pounds 800 windfall

Alliance & Leicester, Britain's fourth-biggest building society, today announces plans to become a bank, holding out the prospect of a share windfall worth pounds 800 on average for its 3 million members. The company is expected to have a value of around pounds 2.5bn when it floats on the Stock Exchange, writes John Eisenhammer.

In a surprise development, Alliance & Leicester intends to hold the vote on its plans by its members before the end of this year. This means it should be in a position to float early in 1997, ahead of its rivals, Halifax and Woolwich.

Alliance & Leicester is also expected to set a retrospective cut-off date for share benefits of 31 December 1995. Those people who have poured millions of pounds into speculative accounts opened since the new year are likely to be left out of the share handout that will accompany flotation.

There is also speculation that the society might offer customers a price promise, in the shape of a guarantee of competitive savings and mortgage borrowing rates, to pre-empt criticism that customers will be disadvantaged by the loss of mutual status.

Woolwich announced its plans to change to bank status earlier this month, and is aiming to float in August 1997. Halifax, the biggest building society, which has merged with Leeds, started the conversion ball rolling in 1994, arguing that the greater freedoms that come with bank status are essential in the increasingly competitive retail market.

Alliance & Leicester's announcement will put an end to months of intense speculation that has seen some building societies swamped by hundreds of thousands of people opening savings accounts in the expectation of benefiting from a handout of shares from a flotation.

Just two weeks ago Alliance & Leicester closed to new savers all savings accounts that conferred membership rights. It had already decided in December to withdraw instant access accounts with membership rights, which meant investors no longer had the option of opening such an account with a balance of only pounds 500. But this move had failed to stem the unprecedented influx of speculative funds into the society.