Halifax, the building society turned bank, today unveiled plans to hand back £1 billion to its shareholders.

But investors, including more than three million individuals who have held on to the windfall shares they collected when it floated on the stock market last year, will not get the special dividend payout some had hoped for.

Instead, the Halifax is to buy back up to £1 billion of its own shares in a move that should push up the value of the remaining shares. And it will mean that future dividends will be shared among a smaller pool of investors, which should mean higher payouts to those who hang on to their shares.

The Halifax announced its plans as it published its maiden set of annual results which showed a 15 per cent increase in group profits before tax and one-off items, up from £1.43 billion sterling to a record £1.65 billion in the year to December 31st last.

Shareholders will get a full year dividend of 17.5p, worth around £57 to anyone with the average windfall holding of 330 shares.

Chariman, Mr Jon Foulds said the buy-back programme would be carried out over the next 12 months and Halifax would be seeking approval for the scheme from shareholders at the annual meeting in April.

Results for 1997 showed overall pre-tax profits up from £928,000 to £1.63 billion, after taking into account exceptional items.

Britain's biggest mortgage lender, the Halifax saw its share of the new home loans market hold at 16 per cent, equivalent to £12 billion a month.

But it saw a massive drop in its share of the net lending market, which takes into account home loans that have been repaid.

Its share of net lending fell from 11 per cent to 6 per cent as home buyers who had kept their mortgage with the Halifax simply to cash in on the flotation windfall moved them elsewhere. The Halifax said an increasing number of customers, 43 per cent, had taken out fixed rate mortgages.