First National Building Society is likely to raise fresh equity capital when it floats on the stock market that is if members of the mutual society approve its conversion into a public company and the flotation on the stock market. This new capital will be used to fund expansion into new business areas and to develop customer service.

Setting out his arguments for conversion, FNBS managing director, Mr John Smyth, said mutuality was not a flawed concept. But the FNBS board has decided that conversion and flotation is the best way to make its mark as a top class retail business.

FNBS's strategy for profitable growth involves "building competitive advantage around customer service" in its core retail lending and savings businesses. This involves finding out what customers want and providing it when, where and how they want it. The strategy requires flexibility, capital and access to diversified sources of funding, he said. Conversion and flotation, with its ready access to funds, is its chosen route to achieve its strategic business objectives.

Members of a mutual are entitled to free shares on conversion the release of the embedded value of the mutual to its owner members. As the debate about the benefits of mutuality versus conversion and flotation rumbles on, the Investors Chronicle recently estimated that it would take an average mutual member 50 years to get the average payout of £1,250 sterling received by members of converted mutuals in Britain.