Shares fall as bank u-turns over funding

2:27am Thursday 15th May 2008

Shares in Bradford & Bingley plunged to a record low after the mortgage bank did a U-turn and announced an emergency funding bid aimed at raising £300m.

At the close of trading last night, B&B's shares were down 9.3 per at 144p, a slight recovery on their all time low earlier in the day.

One expert has called on chief executive Steven Crawshaw to resign following the damage caused to the reputation of the business by the change of heart only weeks after a categorical denial that the firm was considering such a move.

Damian Reece says the two statements, so close together, leave Mr Crawshaw's position untenable.

Only two weeks ago at the company's annual general meeting in Bradford, Mr Crawshaw refuted suggestions of a planned rights issue, saying Bradford & Bingley had unused funding in place and would keep its capital position under review.

The bank's executives said the buy-to-let specialist had waited for markets to stabilise before going ahead with the deeply discounted share issue in order to strengthen its capital ratios The bank is seeking to raise £300m from shareholders in a bid to bolster its balance sheet as economic forecasts become gloomier and fears about the housing market grow.

The rights issue, which will offer shares at a 48 per cent discount to the company's 158.75p share price on May 13, follows similar moves by Royal Bank of Scotland and Halifax Bank of Scotland. Bradford & Bingley says the move would reinforce its position as one of the UK's "better capitalised" banks.

The former building society, which listed on the London stock market in December 2000, will offer 16 shares for every 25 held, at a price of 82p. About 900,000, or 44 per cent, of the company's shares are owned by private investors.

Mr Crawshaw said: "The rights issue will strengthen our financial standing, reinforcing our position as one of the better capitalised banks in the UK."

The rights issue comes against a background of falling house mortgage lending and fears about the housing market.

Mortgage lending for house purchases fell to its lowest level for more than three decades in the first three months of the year, according to the Council of Mortgage Lenders. The number of loans fell to 142,000 between January and the end of March.

Lending to first-time buyers and home movers nearly halved year-on-year in March said the CML.

Fears about the housing market increased after a secret Cabinet briefing paper showed ministers expect house prices to slump by between five and ten per cent this year.

The bleak assessment was unwittingly revealed by Caroline Flint as she arrived at Number 10 to brief the Prime Minister.

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