WHEN millions of small savers in building societies collected "free" cash from a series of flotations during the Nineties, their main worry as shareholders seemed the risk of dying of boredom.

A decade or so ago, bank shares paid solid dividends - about two or three per cent a year - and moved little in value, either up or down.

But those who put "windfall"

shares in the drawer (and even bought more) know differently today.

Last week, more than 850,000 small investors at Bradford & Bingley (B&B) saw the value of their holdings fall hundreds of pounds in a day - to a fifth of their value a couple of years back.

B&B shares, worth £5.21 each in March 2006, have changed hands for barely £1 in recent days.

Even holders of 250 B&B shares, the minimum allocated in its flotation, face a call for another £131.20 to pay for their entitlement of 160 shares in the £300m rights issue needed to support the bank's battered balance sheet.

Northern Rock shareholders have already been sunk. Halifax Bank of Scotland (HBOS) shares, worth £11.55 each barely 16 months ago, hover nervously around the £4.50 mark, pending another rights issue.

Alliance & Leicester (A&L), also enfeebled by the credit crunch and its reliance on the money markets, has fallen from a peak of £12.36 to little over £4.

City analysts fear a possible rights issue there too before long.

So, are building societies and banks a lost cause for small investors - or is this the very moment to back them?

Anthony Bolton, famous for his stewardship of Fidelity's Special Situations Fund, has suggested this may be a good time to buy bank shares, on the assumption they are at the end of their problems.

City wisdom says banks only launch rights issues when all their problems are in the public domain.

If they have them any earlier, there is a chance they will need second and third rights issues - a disaster for their bosses.

Small investors may have taken the message on board.

According to execution-only broker TD Waterhouse, the list of top ten shares chosen by small investors last week is headed by Royal Bank of Scotland (RBS), Barclays, Lloyds TSB and B&B - with HBOS seventh and A&L tenth.

Obviously, it's a risky strategy in uncertain times.

Nick Raynor, investment advisor at The Share Centre, said: "Bank shares pay good yields, but their value has been falling by a larger amount.

"Barclays was paying seven per cent two weeks ago at £4.50, and now it's down to £3.80.

"Banks have already plunged through the levels we predicted, and we see further weakness in the sector.

"We don't rule other possible rights issues, from Barclays and A&L - and possibly even a second rights issue from Royal Bank of Scotland, which would really set the cat among the pigeons, if it fails to raise cash by selling off assets."

Despite this, he understands why some small investors remain keen on bank shares.

"They see banks have made bucketfuls of money over the past 25 years, and continue to do so away from mortgages," he said.

Richard Hunter, of discount broker Hargreaves Lansdown, said: "It's important to remember Northern Rock didn't actually go bust. Its life was cut short by a massive liquidity problem, after it had adopted a particularly aggressive business model."

However, he thinks that putting fresh money into B&B shares now is a bit like putting £10 under the mattress.

"It might still be there in four years' time, but your money would have done better elsewhere,"

he said.