Building Societies, and the turbulent times of a bank shareholder
It doesn’t seem that long ago that HBOS was doing it’s rights issue – offering shareholders more shares at a discounted rate.
I’ve been a shareholder for years – ever since the Halifax demutualised – and I’d been a member of the Halifax Building Society since my parents opened my first savings account a few months after I was born.
As an idealistic 19 year old, I’d voted against demutualisation believing – as I do today – that an organisation based on serving its members first, is better than one that puts it’s shareholders first. Didn’t stop it of course. Only 3% voted against – the lure of “free money” clearly outweighing all else.
In return, I was given 200 shares. No idea what they started out being worth, although I know at one point they ended up being valued at around £1,300.
I never sold my shares – never really bothered seeing what they were worth and I missed two or three peaks in price, only finding out about them some weeks later. Halifax merged with the Bank of Scotland. And I just pocketed the twice-yearly dividend and watched from the side, and every now and then voted in the AGM. Usually against something that the “Board recommended” just to show them I was no push over. Or somet.
Then the whole Northern Rock thing happened, then a rights issue.
HBOS’s shares were low at the time. But we were being told that the bank was in a good position. I did what was my first ever dabble in shares. I was one of the few who took up the rights issue. The share price couldn’t get much lower I thought. In a few years time, things will stabilise and the price will go up.
I paid about £200 for the 72 additional shares.
Then the price went lower. And lower. And lower.
Now HBOS is no more. My shares are now in the mysterious Lloyds Banking Group, and HBOS unvieled a £11 billion annual loss.
As I type, my whole set of shares is now worth half what I paid for those 72 extra shares in HBOS. There’s even talk of potential nationalisation for the group.
It’s a funny old world.
Shares are, of course, a risky business, and they’re also a long term thing. They may go up as well as down over time. If you don’t like the idea of risk, don’t invest.
But at the same time, I can’t help but muse on why HBOS got into the state it did. That it started serving the shareholders rather than it’s customers. True the customers did get some good deals for a bit, but the bank became reckless. Obsessed with growth and shareholder value.
It wasn’t the only one to play it, but it was still a dangerous game. And shareholder value brought down some big names in the banking sector. And now, as a shareholder, I now have a different reward for the actions done in my name.
I’m not moaning. It’s what happens. And it shows what happens when you take an organisation and it starts on the endless treadmill of providing “value”. Risks are run. And when you take risks, there’s a chance to lose.
The result of all this is a reminder why I like building societies. Building societies know exactly where the money has come from. And they know exactly the people they should be providing value to. And they’re both the same.