B&B plummets into the red and bad debts rocket

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The buy-to-let specialist, runner-up for the most prominent subprime victim in UK banking behind Northern Rock, made losses of £26.7 million in the first half compared with profits of £180.4 million in the same period last year.

It said bad-debt charges jumped from £5.3 million to £74.6 million as ever increasing numbers of borrowers struggled to make loan repayments. Some £18 million of the hit was due to "organised mortgage frauds".

The firm also wrote off £155 million on dodgy investments in the credit markets.

Chairman Rod Kent, who has come under fire for his handling of B&B's botched £400 million fundraising, said the results were "disappointing" and warned of further pain this year.

Pym, former chief executive of Alliance & Leicester, added that he will outline his plans for B&B in the autumn, and is "confident of success". Pym joined B&B last week and will earn £2.25 million for the next 10 months' work. The shares rose ¼p to 50½p.

"The results for the half year are of course disappointing for us and our shareholders," said Kent. "In the light of continuing weakness in the housing market and the wider economy, we continue to expect arrears and repossessions to increase for the remainder of the year."

Mortgages three or more months in arrears rose from 1.48% of lending to 2.29%. Like other banks, B&B is cutting back on mortgage lending as the housing market deteriorates and said lending in May and June was "a little over half" that of previous months. Net lending fell to £1.9 billion in the first half from £4.5 billion a year ago.

Kent today defended this month's controversial £400 million fundraising, after two earlier attempts to bring in cash failed. Shareholders snubbed it, leaving 55% of the stock with banks and institutional investors.

"It has been a tortuous process," said Kent. "But it is important that we have a strong capital base to weather the current economic climate. We are one of the best-capitalised banks in the UK."