Northern Rock members set for pounds 2,150 windfalls

More than 800,000 members of Northern Rock are set to receive a windfall of at least pounds 2,150 each when it becomes the latest building society to float on the stock market today.

Northern Rock is likely to be valued at around pounds 1.9bn when it floats tomorrow. Analysts believe it could soon be knocking on the door of the FTSE 100 index, fuelling demand for its shares and triggering boosting windfalls for members.

The free shares than Northern Rock members will be given tomorrow are likely to be worth 20 per cent more money than analysts first expected.

Northern Rock shares are expected to fetch 430p each when it goes to market today, compared to early estimates of 360p a share. Members will receive 500 shares each, likely to be worth around pounds 2,150. Some savers who also have mortgages are entitled to 1,000 shares.

Analysts yesterday insisted the shares were well valued and may even rise to the 500p mark fuelled by persistent takeover rumours.

A 500p share price for Northern Rock would value the new bank at approximately pounds 2.2bn - probably enough for a listing in the FTSE 100 index.

Even the prospect of reaching FTSE 100 levels is likely to fuel demand for shares among fund managers who track the index and have to "make up their weight" in companies that join it, further boosting share prices.

Nikko Europe analyst Tim Clarke said: "It doesn't look overvalued at all compared with the rest of the sector - building societies, banks and some insurance companies.

In current market conditions, with the banking sector hopping ahead, it could move towards the pounds 5 level over the next three months. If people thought it would go into the FTSE they will start buying it."

Unlike other floating building societies, Northern Rock has seen 95 per cent of its members take up the offer of 500 free shares each.

More than 43 per cent of its members, mostly in the north-east of England, elected to sell their shares straight away in an auction held yesterday - compared to just 23 per cent at both the Halifax and Woolwich.

But if prices hit the 500p mark, these 350,000 members will have missed out on pounds 350 each.