B&B issues profits warning

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The UK's biggest buy-to-let lender said full-year profits were set to suffer as more borrowers fall behind with their repayments.

The update came as Bradford & Bingley (B&B) confirmed it was selling 23% of the business to private equity firm Texas Pacific Group (TPG) in a move set to raise £179 million.

B&B said it had racked up an £8 million pre-tax loss in the four months to the end of April after suffering a further £89 million hit from the credit squeeze and a £36 million charge from increasing arrears.

The group also restructured its recently-announced rights issue, with shareholders - including 850,000 private investors - now being offered shares at 55p, rather than 82p previously.

The move will raise £258 million instead of the £300 million proposed when the controversial exercise was announced last month. The developments came a day after B&B said chief executive Steven Crawshaw had stepped down for health reasons.

The former building society saw shares plummet more than 30% at one stage as stocks fell across the wider banking sector.

Halifax Bank of Scotland was among those worst affected, with shares down 8%, despite reassuring that its rights issue was going to plan. Royal Bank of Scotland also sought to reassure over its buy-to-let arrears levels as investor fear spread to other banking groups.

B&B said arrears levels had risen to 2.16% against 1.63% at the end of December for those three months or more behind with repayments.

It cautioned that the numbers of borrowers missing repayments was set to increase further amid the housing market slowdown and economic uncertainties, although it said arrears should increase at a slower pace in the second half of the year.