Last stand alone Mortgage Lender standing…  Can Bradford & Bingley make it through the bad times?

Last stand alone Mortgage Lender standing… Can Bradford & Bingley make it through the bad times?


Can this bank weather the current economic tempest if giants like Northern Rock have sunk?


B&B may thank its handsomely paid chief executive if the bank goes under due to greedy bankers.

It is now the only stand alone mortgage lender after Alliance & Leicester voted to be taken over by Santander last week. Today the FSA has suggested rescuers as part of contingency plans to save the bank from further market turmoil.


The bank, worth £401 million, would be broken up and its assets (worth £52bn) sold if it runs into difficulty. If worse comes to worst we could see it nationalised like Northern Rock. The main potential acquirers are thought to be Santander and HSBC, although neither seems particularly interested. Yet, the National Australia Bank, despite its own problems, is also a potential buyer.


Bradford & Bingley is the leading provider of specialist residential mortgages on secured on properties and also provides a wide range of saving products. Though, it is commonly referred to as the biggest buy-to-let loans specialist. B&B’s half year results released at the end of August shows B&B made an underlying profit of £70m before tax, but exhibits statuary losses before tax of £26.7m reflecting losses on treasury assets. There has also been slow growth on mortgage balances. Arrears on acquired loans are continuing to rise which is of no surprise considering the state of the economy. Regrettably, this has left the board cautious of economy trading, which although understandable, is exactly the kind of act that jars cogs in the economy’s wheels.

Bradford & Bingley sounds like a strong bank. It assures us it has strong funding and is well capitalised. It has just completed a £400m rights issue and is one of the best capitalised banks in the UK. But, brace yourself, 85% of its mortgage book is riskier buy-to-let and self-certified mortgage loans. Furthermore, last Wednesday Moody’s downgraded the firms covered bonds and may downgrade them further. Stir in some panic and no doubt B&B could be the next victim.

Despite all this B&B has categorically denied being in talks to secure its future, this bank believes it is strong enough to make it through hard times.


It seems that much of the blame for the economic crisis has fallen upon the shoulders of greedy bankers, and to a lesser extent hedge funds, speculators and shorting. On the subject of greedy bankers, B&B had a new Chief Executive in August, Richard Pym.


Mr Pym retired from being group chief executive of Alliance & Leicester in July 2007. He is also a non-executive chairman of Halfords Group plc, the company that sells car parts and bicycles. Luckily for B&B he is a qualified chartered accountant, unlike Andy Hornby ex HBOS chief executive. Mr Pym has a basic salary of £750,000 per annum for balance 2008 and the first six months of 2009. He will also receive a guaranteed minimum cash award of 50% of his salary for these periods. Plus Mr Pym will receive deferred shares equal to the cash awards. Ridiculous salaries and bonus’s made the system crumble, including Mr Pym. So if it all goes pear shaped is it just poetic justice?


By Kate Dudley


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