Why B&B shareholders could be on to a winner

Borrowers and savers at Bradford & Bingley, which has just floated on the stock market, may do well to keep their shares as a takeover is likely

Bradford & Bingley's windfall of £618 - for borrowers or savers with a flat pay-out of 250 shares - is not a fortune, but should pay for most of the Christmas presents. And that appears to be the favoured option of almost 40 per cent of the new shareholders, who quickly sold when the shares started trading just over a fortnight ago.

Bradford & Bingley's windfall of £618 - for borrowers or savers with a flat pay-out of 250 shares - is not a fortune, but should pay for most of the Christmas presents. And that appears to be the favoured option of almost 40 per cent of the new shareholders, who quickly sold when the shares started trading just over a fortnight ago.

But the advice from independent financial advisers is hold onto your shares for the time being. Speculation is rife that B&B will be subject to takeover offers which are likely to drive the price up. Already the shares which came to the market at 249p had risen towards the end of this week to 262p. "Unless investors need the cash, Chartwell would rate the share a hold," says Craig Wetton, chief executive of Chartwell Independent Financial Advisers, based in Bath. He believes the price remains low compared with other companies in the sector and is an attractive bid target. This view is shared by Ben Yearsley, investment manager at Hargreaves Lansdown, an IFA firm based in Bristol. "At £600 or so we are not talking about a great deal of money. They will probably be taken over within the next couple of years. I'm holding onto my shares. The benefits are more tangible for a saver than for a borrower."

Nationwide are saying something similar, urging B&B borrowers to move their mortgages. Nationwide's standard variable rate is currently 7.09 per cent, compared with B&B's 7.64 per cent. The difference in interest rates will wipe out the windfall within 13 months, calculates Nationwide. Abbey National, too, are laying claim to disenchanted B&B borrowers.

"People can make up their own minds," says Chris Holland, head of corporate affairs at B&B. But borrowers who might get better interest rates elsewhere are likely to be offered an improved deal to keep their custom. "We will discuss it with them," agrees Mr Holland.

Complications arise because B&B now focuses less on lending, providing a comprehensive mortgage broking service as well. The bank sees a growing proportion of its profitable business coming from the sale of related products, such as its estate agency chain and the sale of insurance products. Existing borrowers and new clients will be given the choice of products provided both directly by B&B and those of other lenders. This is true whether customers approach the bank through its branches, or use its recently acquired subsidiary, John Charcol Brokers.

Ray Boulger, senior technical manager of mortgages at Charcol, says he is not embarrassed at being asked by B&B customers to find a better mortgage product, or offering a mortgage from another lender. He says about a quarter of borrowers (irrespective of lender) find it worth their while to pay redemption penalties to move to a cheaper mortgage, with a much higher proportion gaining from a move if there are no redemption penalties. "Check with your lender what they will offer as an existing customer and compare with what else is on the market," suggests Mr Boulger - advice which applies equally to borrowers with B&B and other lenders.