June 02
Trouble in the BB House
Cityblogger has fond memories of the old adverts featuring the rather stuffy Mr Bradford and Mr Bingley with their smart bowler hats and umbrellas. He wonders what these two stout fellows would make of the nightmare poor investors woke up to this morning – a 27 per cent slump in the share price. Ouch!
The good news is that mighty private equity player Texas Pacific Group is taking a 23 per stake in Bradford, investing £179m in the ailing mortgage lender. However, the bad news is that it also issued a profits warning this morning, admitting that trading conditions have deteriorated and customer mortgage arrears are growing. Margins also declined by 18 basis points in the four months to the end of April. What’s more, the company has awkwardly tinkered with its rights issue, and is now raising £400m of new equity instead of £300m, as previously announced last month. But now £179m will come from TPG and £258m from other investors. And chief executive Steve Crawshaw is also stepping down due to heart problems, with chairman Rod Kent is stepping up to the plate, becoming executive chairman.
Analysts at Numis Securities were unimpressed and are reviewing their target price on the shares. “In our view the recent U-turn made surrounding funding issues further deteriorated an already weak brand,” complains James Hamilton, banking analyst at the broker.
And with the shares down by 85 per cent over the past 12 months to 64.25p, City commentators are now calling for Messieurs Bradford & Bingley to hang up their hats altogether. “A speedy purchase of B&B is required to avoid embarrassment,” argues David Buik at BGC Partners. “One product banks do not have any role in financial society going forward. They are too small to cope with the whips and scorns of time. Bradford & Bingley should be taken over by a large European, US or UK bank. A UK bank seems unlikely bed-partner because of the OFT.”
But it’s possible that TPG’s shiny new 23 per cent stake, while good news for now, could be off-putting to other potential suitors.
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