B&B issues profits warning

The buy-to-let lender announced a deal to sell a fifth of its shares to Texas Pacific Group (TPG) - one of the world's biggest buy-out groups - in return for £179 million in funding.

It warned it faced increasing levels of arrears and said underlying profits for the first four months of this year amounted to £56 million, compared with £108 million in 2007.

The company also scaled back its recently-announced rights issue, with shareholders now being asked to raise £42 million less at £258 million. The developments come a day after B&B said chief executive Steven Crawshaw had stepped down for health reasons.

B&B said it had swung into the red in the first four months of the year after suffering a further £89 million hit from the credit squeeze and a £36 million charge as more borrowers fell behind with their repayments.

It reported pre-tax losses of £8 million for the period, although it said underlying profits stood at £56 million, down from £108 million last year.

The lender reported a significant hike in arrears levels - at 2.16% against 1.63% for accounts three months or more in arrears - and cautioned that arrears will continue to rise amid the declining housing market and economic uncertainties.

But it stressed that its savings and lending businesses "remained sound".

B&B chairman Rod Kent, who has taken on the role of executive chairman until a replacement for Mr Crawshaw is found, said: "The last few weeks have been challenging for Bradford & Bingley and this is a disappointing trading update, reflecting a more difficult market environment.

"I understand shareholders' disappointment. Nevertheless, I am delighted to welcome TPG as a major strategic investor in Bradford & Bingley. With a strengthened capital base and the skills that TPG will bring, I am sure we can develop the business to exploit the opportunities available in our markets in the medium term."