First Active has raised €108.7 million from the sale of its stake in British mortgage and financial services provider, Britannic Money, to Birmingham-based Britannic Assurance.

The money will boost First Active's surplus capital and the company is looking at distributing some of this to shareholders next year.

First Active finance director Mr Michael Torpey said yesterday that the company was considering all its options in this regard and would declare what action it planned to take, if any, when it released its preliminary results on January 28th.

Analysts said the proceeds of the Britannic disposal would leave First Active with surplus capital worth around 100 cents per share at the end of this year while still retaining an adequate Tier One capital ratio of 7 per cent. First Active will have to consider how much of this to distribute while also finding a tax efficient way to do so.

Among the options open to the company is the payment of a special dividend.

But Merrion Stockbrokers analyst Mr Seamus Murphy points out that many of the company's small shareholders - who acquired the shares when the building society floated four years ago - would be taxed at the marginal income tax rate of 42 per cent on such a payout. A share buyback is another possibility, but recent attempts by the company to purchase its own shares in the market have not gone well as it has been unable to pick up the stock.

First Active may also consider issuing bonus shares which could be redeemed at a later date and would have the advantage of being subject only to capital gains tax.

First Active said yesterday that it received £56.5 million sterling (€88.7 million) in cash from the sale of 40 per cent of the ordinary shares of Britannic Money while a further £13 sterling was received for 100 per cent of the company's preference shares.

The disposal is expected to generate an exceptional gain of around €40 million before tax and after allowing for costs and goodwill in the current year.

It will boost the company's Tier One capital ratio by about one percentage point to 11.5 per cent, high relative to its peers. The move also completes First Active's exit from the British market.

Following the disposal, it will be left with an old book of securitised mortgages which is no longer active and a British deposit book administered by Britannic.

"The strategy for First Active is focused on the Irish mortgage and savings market and we are satisfied to dispose of our remaining stake in Britannic Money at this stage in our development," Mr Torpey said. The bank has also been given a debenture by Britannic Assurance in exchange for its right to future preference share dividends for 2003 and 2004.

First Active's 40 per cent share in Britannic Money dates from September 2000 when it sold 60 per cent of its British business, First Active Financial, to Britannic Assurance.

First Active shares closed unchanged at €5.30 last night.