End of the Windfall Joyride? Shares under Pressure as Mortgage Banks Feel Pinch of Competition

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Byline: ABIGAIL MONTROSE

THE windfall bandwagon is still rolling, but millions of investors are finding the ride less comfortable than expected.

The next big names to hand out free shares will be Bradford & Bingley, Scottish Widows and Canada Life. But a look at previous payouts shows there is no guarantee that the windfall winners will find themselves on the road to riches.

The banking sector hit the rocks this year and windfall share prices have slumped. Interest rate worries here and in the US have been the biggest problem. But shareholders have faced other challenges.

The former building societies, often referred to as mortgage banks, have been damaged by intense competition, says Ian Hodges, investment analyst at Barclays Stockbrokers.

'All demutualised building societies have seen their shares come off their highs and are feeling the effects of increased competition in their traditional savings and mortgage markets.

'Competitor Standard Life bank, for example, has been aggressively winning mortgage business. And the likes of Egg, the Internet arm of Prudential, and the supermarket banks have been taking savers,' he says.

'Mortgage banks responded by increasing savings rates and lowering mortgage rates, but this reduced their margins. Many now accept they will have a smaller market share and will diversify their interests.

'Many have decided not to fight for new mortgage business and …