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Rock-style run could hit B& B, says broker
Robert Lea15 Feb 2008
Bradford & Bingley could be hit by a Northern Rock-style run, a major City stockbroker said today, warning a further 80% slide in the bombed-out share price is a near even-money chance.
Shares in the building society-turnedbank fell to new lows today, hit by a raft of sell notes as the City took stock of yesterday's announcement of halved profits, writedowns on investments and soaring liabilities.
The shares fell 5 1/2 p to 181 3/4 p, extending their crash to 25% since yesterday's full-year figures. The stock, much of it in the hands of small depositors and borrowers who were B& B members at flotation in 2000, has fallen 60% this year.
The most scathing analysis today, by Morgan Stanley, said the shares could yet fall far further. The broker said: "The probability of our bear case of [the stock falling to] 33p rises to 45% on concerns that the writedowns to date are insufficient." Morgan Stanley warned customers could start quitting B& B, which could lead to the sort of run on Northern Rock seen last September, the first on a British bank in 150 years. It added: "Events may damage public confidence and hurt B& B's deposit-gathering capability." Deutsche Bank told its clients still holding the shares to sell up, saying it believes B& B will announce further writedowns at a time of rising funding costs and a worsening mortgage market.
Goldman Sachs said the state of B& B's finances "removed significant support for the shares". Voicing worries over a leap in arrears data, it added: "Our longer-term concern is that impairments were higher than expected as secured credit quality appears to be deteriorating earlier than expected." Credit Suisse said B& B's problems are against a worsening economic backdrop, and added: "Our assumption is that house prices fall 10% and arrears double, broadly a third of the severity of the [major housing downturn in the] early 1990s. Credit markets are clearly nervous. We think equity investors should be as well." Rival Alliance & Leicester was off 14 1/2 p at 544 1/2 p amid speculation that it could announce a rights issue or dividend cut when it reports next week.
Credit-card spending topped £32.4 billion in the three months to the end of 2007, the second-largest amount ever borrowed on plastic in a quarterly period, latest figures show.
Experts fear that consumers not only went overboard at Christmas but have also started paying household bills on credit cards. The figures from Apacs, the banks' clearing system, showed that debit card spending, which often goes on to overdrafts, rose to a record £59 billion..
