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Head of lending goes as B&B ups crisis hit
Robert Lea, Evening Standard22 Apr 2008
The executive in charge of lending at Bradford & Bingley has been ousted as the building society-turned-bank today admitted its credit-crunch losses have increased to £328 million.
But amid fevered City speculation, the buy-to-let mortgage specialist signalled it has no need for an emergency rights issue despite a increasing number of its customers struggling to pay their home loans.
B&B said Robert Dickie, its £480,000-a-year group operations director, will be leaving the bank and its board at the end of the month, appearing to carry the can for B&B's credit-crisis losses in the structured finance market, which have seen the bank's shares collapse by two-thirds in the past year.
The bank admitted in a first-quarter trading update that its exposure to complex credit instruments is continuing to hurt following the £226 million of writedowns it was forced to take at its full-year results.
It today said it would be booking a £38 million loss on the sale of a portfolio of corporate bonds known as PPNs as well as a £44 million writedown on the value of its packaged debt derivatives known as CDOs and CLOs.
B&B was last week forced to tell the Stock Exchange it would not be launching a rights issue despite reports that chief executive Steven Crawshaw had been close to making that call. Today it said it is fully funded into 2009, with savings deposits this year so far totalling £1.9 billion. It said its previously arranged £2 billion finding facility is currently undrawn.
"What the B&B is saying is that having to raise money is not on the radar at the moment - that there is no need for an emergency rights issue," said one analyst. But the lender conceded the mortgage market is continuing to look sick, adding: "The new business pipeline is below the same period last year. As we anticipated, arrears levels have continued to rise in the first quarter, reflecting increased payment strain.
"This has resulted in higher credit impairment provisions and we have significantly increased our management focus on collections processes."
Reader views (1)
I can't feel much sympathy for an organisation that, only a few years ago, was on the brink of breaching every compliance rule in the book. This clearly would have had dire consequences had the details been revealed at the time. All UK banks are feeling the consequences of poor compliance coupled with no-commercial managers being empowered to lend money without proper due diligence. Its also not so much that the banks can't decrease borrowing rates more that they have no idea what they should do to rectify their positions. Fact is that no MBA, PHD or Masters in mathematics will help them in the current climate. I hear tales of major financial institutions begging clients to "do more business" with them whilst increasing the rates if these customers agree. Doesn't sound particularly clever to me.
- Jonw, Kingston Upon Thames, 23/04/2008 14:05
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