Bradford & Bingley sold nearly a quarter of its business today as it moved to shore up its finances in the face of a sharp downturn in trading.
The UK’s biggest buy-to-let lender said full-year profits were set to suffer as more borrowers fall behind with their repayments.
The update came as Bradford & Bingley (B&B) confirmed it was selling 23% of the business to private equity firm Texas Pacific Group (TPG) in a move set to raise £179m (€226m).
B&B said it had racked up an £8m (€10.10m) pre-tax loss in the four months to the end of April after suffering a further £89m (€112m) hit from the credit squeeze and a £36m (€45.5m) charge from increasing arrears.
The group also restructured its recently-announced rights issue, with shareholders – including 850,000 private investors – now being offered shares at 55p, rather than 82p previously.
The move will raise £258m (€326m) instead of the £300m (€380m) proposed when the controversial exercise was announced last month.
Today’s developments came a day after B&B said chief executive Steven Crawshaw had stepped down for health reasons.
The former building society saw shares plummet more than 30% at one stage today as stocks fell across the wider banking sector.
Halifax Bank of Scotland was among those worst affected, with shares down 8%, despite reassuring that its rights issue was going to plan. Royal Bank of Scotland also sought to reassure over its buy-to-let arrears levels as investor fear spread to other banking groups.
B&B said arrears levels had risen to 2.16% against 1.63% at the end of December for those three months or more behind with repayments.
It cautioned that the numbers of borrowers missing repayments was set to increase further amid the housing market slowdown and economic uncertainties, although it said arrears should increase at a slower pace in the second half of the year.
The number of buy-to-let borrowers three months or more behind with repayments increased by 52% to 3,037 in the four-month period, while repossessions rose by a quarter to nearly 700.
Underlying profits reduced to £56m (€70.7m), compared with £108m (€136M0 in 2007, and the full-year outlook is now “more cautious”, according to the group
But B&B stressed that its savings and lending businesses “remained sound”, adding that it remained funded into 2009 despite the wholesale money market crisis.
Its deal with TPG will see £179m (€226m) of funds pumped into the group in return for a 23% stake in the West Yorkshire-based lender.