Banks To Rescue Of Bradford & Bingley

[ollie plimsolls]

Daily Mail

Britain's Big Six banks staged a dramatic rescue of Bradford & Bingley last night in a bid to avert a new Northern Rock crisis.

Under pressure from the financial services regulator, they agreed to buy a large chunk of shares in the beleaguered bank.

The bail-out followed a £400million rights issue by the former building society which was sunk when its shares plunged further during a day of bloodletting on the stock market. Up to £36billion was wiped off the value of Britain's biggest listed companies amid fears of recession.

Bradford & Bingley shares, which have fallen by nearly 90 per cent over the past year, have now dropped to a level where shareholders will refuse to buy any more.

They were described as worthless by one analyst yesterday and the rights issue was described as 'a dog's breakfast'. Existing shareholders had been offered the chance to buy at a 'discounted' 55p.

But the price nosedived a further 19 per cent to a record low of 34p yesterday, following a fall of 16 per cent on Monday.

It is understood the six banks, HBOS, Abbey, Barclays, Lloyds TSB, Royal Bank of Scotland and HSBC, stepped in after being leaned on by the Financial Services Authority.

They have promised to buy the shares which Bradford & Bingley's main underwriters, the American investment banks UBS and Citigroup, do not buy, a procedure known as ' subunderwriting'.

As a result, the high street banks will end up owning at least 30 per cent of their rival.

One banking source said: 'It is in everyone's interest that there is confidence in the market.'

Bradford & Bingley's problems have sparked fears that Britain could be facing a second Northern Rock crisis. The bank categorically denies this suggestion, insisting that it is a strong business which is being unfairly targeted by ruthless share speculators.

Much of the concern surrounds its position as Britain's biggest buy-to-let mortgage lender. About £24billion of its total mortgage book of £40billion are buy-to-let mortgages.

But it has had a torrid few months which has created the City equivalent of a television soap opera, lurching from one disaster to another.

Its chief executive, Steven Crawshaw, resigned abruptly due to poor health. He is understood to be suffering from angina. He has not been replaced.

His departure was followed by a calamitous profits warning from the Yorkshire-based bank.

It admitted that it has lost £8million in the four months to the end of April, compared to profits of £107million pre-tax for the same period last year.

It was rescued by the American private equity firm, Texas Pacific Group, which was going to buy a 23 per cent stake for £179million.

But TPG ran for the exit after Bradford & Bingley's shares were downgraded by the ratings agency, Moody's, late last Thursday.

City brokers have become increasingly negative about the bank's shares, advising investors to offload.

The bank has about 850,000 small shareholders, most of whom received free shares when Bradford & Bingley converted from a building society in 2000.

In a normal rights issue all the discounted shares would be snapped up by shareholders keen to get a bargain.

But Bradford & Bingley's plummeting value has reversed the normal rules.

Leigh Goodwin, UK banking analyst at the bank Fox-Pitt Kelton, said: 'We cannot rule out the possibility of an effective failure with shareholders receiving little or nothing for their shares.'

[the end is a bit nigher]

Oh how I want this shambles to go bust and many of the ******wits employed by it to become jobless. I worked there for a very short period of time and a more arrogant self-assured bunch of incompetent tossers I have never met. Yes, there were a couple of decent people, but they didn't stay long. And as an organisation, the products they sold and advertising approach they took was odious. May we soon be rid of them.

[grey shark]

They have promised to buy the shares which Bradford & Bingley's main underwriters, the American investment banks UBS and Citigroup, do not buy, a procedure known as ' subunderwriting'.

'subunderwriting' ......... looks like a new buzzword on the block

[keef]

I worked there for a very short period of time and a more arrogant self-assured bunch of incompetent tossers I have never met.

I work with this company too & can second that.

Some of them are even more arrogant than me which quite frankly I find sickening ...

[tinker]

And so the toxicity spreads...

[wonderpup]

'subunderwriting'

Mmm- it's got that 'underwater' feel about it.

[Byron]

According to News at Ten, the FSR denies any such meeting took place....spin....spin.....spin?

Similarly, HBOS seem to be in the pickies, their rights issue priced at a "discounted" 275 is not likely to be snapped up as the regular share price has fallen to 270

[Ted D. Bear]

One banking source said: 'It is in everyone's interest that there is confidence in the market.'

FFS! There is no market, it's a barely concealed cartel... I'd have a lot more confidence if the market just left B&B to rot like any badly run business should. :angry:

[Injin]

FFS! There is no market, it's a barely concealed cartel... I'd have a lot more confidence if the market just left B&B to rot like any badly run business should. :angry:

The bankers day is over.

Matter of time now.

Thank ******.

[IP Newcomer]

FFS! There is no market, it's a barely concealed cartel... I'd have a lot more confidence if the market just left B&B to rot like any badly run business should. :angry:

Well if it were a genuine move by the big banks to do stop people panicking it would be OK. But it looks like a liquidity pump from the government.

I wonder why TPG walked away? If they were being given money to do it through the government (as seems likely) what was their problem?

[billybong]

One banking source said: 'It is in everyone's interest that there is confidence in the market.'

-------

Oh yes just like last year before Northern Rock went bust.

Exactly who is the "everyone" in the "everyone's interest.

Nothing quite like having the sort of confidence that results in a run on a bank.

[MRMX9]

Oh how I want this shambles to go bust and many of the ******wits employed by it to become jobless.

Maybe so - but there would also be a lot of branch staff who would also lose their jobs. Many of them may have been with B&B for years when it used to be a mutual building society.

Frankly I rue the day I ever voted for the Bradford and Bingley to become a bank - I may have sold my shares long ago but its still a shame to see an organisation with such a long history being ruined by the buy to let and lie to buy brigade! If only Halifax, A&L, Northern Rock et all had stayed building societies maybe this whole sorry mess wouldn't have come to pass!

[Its time to buy]

B&B job destined to go wrong

[tuggybear]

I work with this company too & can second that.

Some of them are even more arrogant than me which quite frankly I find sickening ...

nice

[interestrateripoff]

So a large group of bankrupt banks have bought out another bankrupt bank!!!!

Carry on banking.

How long can this house of cards continue.

The banks haven't tackled any of the issues they have, if debt is the problem repayment is the solution. Otherwise the only other option is bankruptcy.

[Tiger Woods?]

And so the toxicity spreads...

Yep. This truly does scare me, though can understand why the absolute last thing the government wants is another bank to go down. One is an accident; two suggests carelessness!

If a second bank went down, we could more or less guarantee a couple of others popping too. Quite worrying.

[Guest Mr Parry]

'subunderwriting' ......... looks like a new buzzword on the block

Sub-Underwearing . . . brown is the new black this autumn.

[Radge]

Sub-Underwearing . . . brown is the new black this autumn.

Classic!

[kagiso]

Oh how I want this shambles to go bust and many of the ******wits employed by it to become jobless. I worked there for a very short period of time and a more arrogant self-assured bunch of incompetent tossers I have never met. Yes, there were a couple of decent people, but they didn't stay long. And as an organisation, the products they sold and advertising approach they took was odious. May we soon be rid of them.

To all intents and purposes it has gone bankrupt.

The other banks have bought in for peanuts.

In the next few months the board will quietly be replaced, the branches and current business sold off to one or more banks, the (closed) mortgage books parceled out between the rescuers for free, and kept until they can be sold off at a reasonable discount, and the head office closed down.

"Bradford & Bingley" will remain, but solely as a mortgage brand for a big banking group that currently has a small share of the mortgage market.

B&B is a meaningful company is no more, your wishes have already been granted.

[Guest Mr Parry]

To all intents and purposes it has gone bankrupt.

The other banks have bought in for peanuts.

In the next few months the board will quietly be replaced, the branches and current business sold off to one or more banks, the (closed) mortgage books parceled out between the rescuers for free, and kept until they can be sold off at a reasonable discount, and the head office closed down.

"Bradford & Bingley" will remain, but solely as a mortgage brand for a big banking group that currently has a small share of the mortgage market.

B&B is a meaningful company is no more, your wishes have already been granted.

As they bail the smaller ones out, then slightly bigger ones, then big ones. Dominos?

[Justice]

FFS! There is no market, it's a barely concealed cartel... I'd have a lot more confidence if the market just left B&B to rot like any badly run business should. :angry:

Yes i agree with you.

If banks that are in trouble themselves are force to buy up rivial banks and things keep going wrong then this will ensure a meltdown across the whole system.

[expatowner]

bouncing upwards this morning!

[Realistbear]

Yep. This truly does scare me, though can understand why the absolute last thing the government wants is another bank to go down. One is an accident; two suggests carelessness!

If a second bank went down, we could more or less guarantee a couple of others popping too. Quite worrying.

There can be no doubt that the hand of Gordon miraculously appeared, Madonna-like, late last night as the bankers were told to rescue their HPI chums at B&B. "I will not allow......" You know the kind of thing Gordon likes to say. His PM-ship is on the line in with each passing day and I suspect Glasgow will be the end unless New Labour retain the seat.

[Wait & See]

There can be no doubt that the hand of Gordon miraculously appeared, Madonna-like, late last night as the bankers were told to rescue their HPI chums at B&B. "I will not allow......" You know the kind of thing Gordon likes to say. His PM-ship is on the line in with each passing day and I suspect Glasgow will be the end unless New Labour retain the seat.

What I don't understand is why the other banks didn't tell Gordo to beat it?? What do they care??

Unless they also may need a bung soon (i.e every bank in the UK).

Just gets worse and worse.

[copydude]

There can be no doubt that the hand of Gordon miraculously appeared, Madonna-like, late last night as the bankers were told to rescue their HPI chums at B&B.

There's nothing new in this story. And some question how committed the banks are. UBS and Citigroup are facing a loss of 50 million as things stand. (100 million less their underwriting fee.) Or even more if they are paying the sub-underwriters. Do the other banks really want 30% of a disaster like B&B?

The Times today says:

Now a third rescue attempt has been tabled, which should inject £400 million of fresh capital into the stricken bank by the end of August, toughening up its balance sheet and giving it months more breathing space. But even now, poor wording of the deal announcement has left many outsiders doubting whether that £400 million really is committed this time.

If, as regulators and bankers are claiming off the record, nine of the biggest financial institutions in Britain really have irrevocably committed to underwrite this cash injection, they should say so explicitly. If necessary, the FSA should force them to say so. Better still, it should ask them to place the cash in a ring-fenced account now. This is not a time for timid half-measures.

Six weeks is an awfully long time in these jittery markets. Time and ambiguous drafting are the enemies of confidence.

http://www.timesonline.co.uk/tol/comment/l...icle4296413.ece