Halifax Could Have Another Pounds 3bn to Hand out after Float
Jill Treanor Banking Correspondent, The Independent (London, England)
Halifax Building Society could have more than pounds 3bn to spend or return to its millions of new shareholders after it floats on the stock market in June.
The society will have the largest shareholder register in the UK when its 8.5 million members each receive an estimated average of pounds 1,300 in free shares in the pounds 12bn flotation that will result in Halifax becoming a bank. Halifax's strong financial position means that they could be in line for further bonus payouts after the flotation, provided they remain investors.
Roger Boyes, Halifax's group finance director, said yesterday that the use of the excess money was an urgent matter. "But, we're not going to knee-jerk on it," he said. "We have not ruled out repatriating capital to shareholders," Mr Boyes said. But he stressed this did not imply that Halifax would definitely return capital to shareholders after the flotation. He pointed to alternative ways to use the money, such as making acquisitions, developing existing business or starting up businesses. Mr Boyes refused to disclose the precise amount of excess capital Halifax will have after its flotation but analysts calculate that the sum could easily amount to pounds 3bn. Their calculations are based on the fact that Halifax has a "tier-one" capital ratio of 14 per cent. The Bank of England requires banks to maintain a ratio of 4 per cent but in practice most banks operate with capital ratios well above this level. Most high street banks have ratios between 6 and 8 per cent. At 31 December 1996, Halifax had pounds 6.87bn of tier-one capital, which is in essence its reserves. It could function easily with half this amount of capital and still conform with its banking rivals. "The question now, the $64,000 question, is what do we do with this . . . It has to be put to work," Mr Boyes said. When Halifax becomes a bank it will come under pressure to produce the best possible returns for shareholders. …