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SCMP Reporter

Britain's biggest mortgage lender, Halifax, became its eighth largest quoted company yesterday.

 In an GBP18 billion (about HK$228.78 billion) debut on the London Stock Exchange, it also rewarded two million customers with an average windfall cheque of GBP2,417.

 The group's shares, which were auctioned off before the weekend at 732.5 pence, surged 6 per cent - much higher than expected - in early trade to 774.5 pence, before falling back to 746 pence.

 The flotation, which will put Halifax slightly ahead of Barclays Bank in terms of market capitalisation, means it will now no longer be a building society, where it is owned by its customers, and instead become a bank, where it is owned by shareholders.

 In the British banking sector it is now the third-largest behind HSBC Holdings and Lloyds TSB.

 Critics of such conversions, which have caused a flurry of activity in the British financial services market, say that customers will now become secondary to shareholders, who are only interested in dividends and share price performance.

 Advocates of building society conversions say that it gives the new bank greater flexibility to raise capital and expand.

 Halifax, which has GBP3 billion in cash on its balance sheet, has already admitted that it is exploring the options for expansion, and is widely tipped to be looking at various ways to increase its spread of activities in the UK market.

 Halifax has 20 million customers, of which two million opted for a cash-offer in return for their support of the deal, while 7.6 million customers became shareholders.

 In a previous conversion to a bank by the Alliance and Leicester Building Society, many shareholders sold their shares on the first day, only to regret the decision later, as the stock rose even further in later weeks.

 Yesterday analysts were urging Halifax shareholders not to take the same action, and to hold on to their free shares.

 About 1.4 million customers have taken that advice by asking for share certificates, while 4.3 million are opening a special shareholder account.

 A total of 1.9 million customers sold at the first auction.

 Shareholders with the maximum entitlement for a cash pay-out would have received GBP10,116.

 Institutional investment demand for Halifax shares was still strong yesterday, as only about 23 per cent of the total float had been allotted to these investors.

 Some analysts predicted the stock could rise as high as 800 pence as investors, particularly funds, scrambled for a holding in the company, although most expected it to fall in the longer term to a range of 645 to 700 pence.



Halifax floats to number eight as bank conversion generates $228b