UK mortgage lender Bradley & Bingley boosts funding

UK mortgage lender Bradford & Bingley today sold £4.2bn (€5.8bn) of loans as it moved to boost cash reserves at a time of soaring wholesale funding costs.

The buy-to-let specialist will make a loss of between £15m (€20.9bn) and £40m (€55.7bn) on the sale of the two loan books, but it pointed out the disposals will improve cash flow at a crucial stage.

The credit crunch seen since August is showing no sign of easing, according to B&B. Lending rates between banks in the UK have rocketed to its highest level in two months, rising to just under 6.45% at one stage yesterday, sparking fears of a further tightening in credit markets.

But B&B stressed the loan book sale was not a desperate move to gain funds, with the proceeds adding to £2.5bn (€3.4bn) funding already raised over the past two months.

Steven Crawshaw, B&B chief executive, said the cash would “further increase the group’s liquidity and provide funding for attractive, higher margin opportunities in these markets”.

Financial services group Dexia paid £2.2bn (€3bn) for B&B’s housing association assets, while GE Real Estate bought some of the group’s commercial property loans for £2bn (€2.7bn).

B&B said it had decided in April that the sale of the housing association assets were non-core.

It has also been reviewing its commercial property loan book for “several months”.

Mr Crawshaw added: “Selling these assets enables the group to focus its activities on profitable growth in the core business of residential mortgage lending and retail savings.”

Shares in the group surged 6% on news of the funding, recovering lost ground recently as banking stocks came under pressure amid further funding fears.