Halifax debut dominates market with £18.4bn share distribution

THE Halifax, Britain's third largest bank and eighth largest company, yesterday made a successful debut on the London Stock Exchange, with nearly eight million people sharing an £18.4 billion free shares bonanza.

Halifax is one of five British building societies which has converted to a stock market listed bank this year. It is offering its savers and borrowers free shares. The flotation - the British stock market's biggest - has increased the wealth of one in six British adults by an average of more than £2,400.

The shares opened at 774.5p higher than the most optimistic forecasts last week. But they later lost ground amid general stock market uncertainty and a sharp fall in the value of other bank stocks including Lloyds TSB, Barclays, and Abbey National.

The closing price, at 734.5p, was only slightly higher than the 732.5p average price paid by 200 institutions in an auction for 23 per cent of Halifax's shares on Friday. In all, 647 million Halifax shares (including the auction stock) changed hands yesterday - a record for any company and half the total market volume.

The debut was buoyed by institutional and retail buying, according to Merrill Lynch, brokers to the issue. The closing price puts the company on a price/earnings multiple of 17 times - higher even than Lloyds TSB, the top rated bank.

Mr John Aitken, banking analyst at UBS, put Halifax's fundamental value at 640p, but said it should continue to trade at a premium to this because of scarcity value.

While Mr John Leonard, banking analyst at Salomon Brothers, said: "Our analysis suggests that 600-650 pence is about where it should be."

In January, Deutsche Morgan Grenfell, adviser to the flotation, estimated the shares were worth 390p-450p, valuing the group at £10.4-£12 billion.

The Halifax flotation has turned the country's biggest mortgage lender into its third biggest bank after 144 years as a mutual.

The group's head of corporate affairs, Mr Gary Marsh, would not comment on what it would do with the over £3 billion in cash. However, he did say that Halifax would consider going on the acquisition trail. "That is one of the options we are looking at," he said.