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Eligible members receive 250 shares each, valuing their stakes at £620. In total, 2.7 million members will receive the windfall, with more than a third opting to cash their gains in immediately. Cheques are expected to be posted by December 11th, giving them a nice little Christmas bonus.
More News
Bradford & Bingley windfalls total £620 -- BBC News
The Fool's Eye View
One million Bradford & Bingley members have decided NOT to try their luck on the stock exchange, opting instead to take the £620 and run. Based on the performance of the Halifax (LSE: HFX) since it floated at 775p in July 1997, who can blame them? Halifax shares now stand at 625p, a thoroughly unimpressive performance over a two and a half year period in which the FTSE All Share index has risen 35%.
The shorter term performance of banking shares depends on the state of the underlying economy. A lot has changed since July 1997. Interest rates were not far away from peaking at 7.5%, followed by 18 months of falling rates and increasing confidence in the housing market, ultimately resulting in the mini house price boom we're just finishing. Halifax were justifiably priced at the top end of market expectations, but as interest rates started to rise again in September 1999, so their shares fell. Increased competition from the likes of egg (LSE: EGG) didn't help either.
That's the lot of banks and their shares. It's a very competitive sector, and one whose short-term health is dependent on the economy. Where does that leave those 1.7m new Bradford & Bingley shareholders? The flotation has valued the company relatively cheaply, especially when compared to some of its smaller banking peers. As it focuses on increasing shareholder returns, you can expect plenty of cost cutting, which in turn will have the effect of increasing profits.
This should not be a repeat of the Halifax experience. Bradford & Bingley shareholders can expect a period of steady yet unspectacular share price performance. However, with interest rates at or near their peak for this particular cycle, and the near term cost cutting opportunities, there is a chance that the shares could just prove a little better performers than many in the City will be willing to give them credit for. That should be enough to convince shareholders to hang on to their new certificates, and over time could even persuade some new buyers to emerge.
Where Next?
• Bradford & Bingley latest share price quote and link to discussion board
• The Unloved Bradford & Bingley -- Motley Fool
• The Motley Fool Research Industry Focus 2001 is now for sale! We give our take on 14 sectors -- including the banking sector -- and identify 21 companies which may just be the winners of tomorrow. Order before December 10th and receive our 2001 Update Service free of charge.