|
Bradford & Bingley, whose accident-prone rights issue finally
closed yesterday with a better than expected take-up, will get its
£400m capital boost, but the mortgage lender still faces a precarious
future.
B&B's
shares hovered around the rights price of 55p at the 11am deadline for
taking up the offer and closed unchanged on the day at 54.75p. Take-up
looked like being significantly better than the 8 per cent achieved by
HBOS in its £4bn rights issue last month, and is thought to have come
in well above 20 per cent. Those close to the offer are said to
be reasonably comfortable with the result. B&B is due to announce
the take-up of the rights issue on Monday. Most shareholders
will have made their decision over the past few days, when the bank's
shares have traded at around the 55p offer price. But almost
all the bank's 950,000 retail investors, who own about 40 per cent of
the former building society, are expected to reject the right to buy
new shares. Citi and UBS have fully underwritten the offer after
renegotiating terms because B&B gave them out-of-date information
about the performance of its loans. The share sale is supported by four
top shareholders who have sub-underwritten about £145m of the total. Six UK clearing banks have also agreed to back the underwriters and could be left with up to a fifth of the enlarged share base. But securing the extra capital will not signal an end to B&B's problems. James
Hamilton, banking analyst at Numis, said: "It will be business as
usual, but unfortunately business as usual is not going to be very
good." The bank has concentrated on untested buy-to-let and
self-certified mortgages, and is committed to buy many billions of
pounds of mortgages originated by GMAC, the US lender. The bank
revealed in June that the GMAC loans had performed worse than B&B's
own assets despite its protestations that underwriting standards at
GMAC were the same as its own. Wholesale funding, for which
B&B relies on for nearly half its lending, is more expensive and
scarce, house prices are falling, and its specialist mortgages could
suffer more than the average in a downturn. With the rights issue over, Rod Kent, the chairman, is expected to redouble efforts to find a buyer for B&B. Alliance
& Leicester has agreed to sell out to Santander of Spain, because
as a small lender with a focus on the troubled mortgage market it was
too exposed to volatile sentiment. B&B is smaller and even more
exposed to risky mortgage business. But with house prices falling
fast and the economy slowing sharply, it would be a brave buyer who
took on B&B's risky assets in the near future. Alex Potter,
banking analyst at Collins Stewart, said that although B&B is
trading at half its book value that might not be enough to tempt a
buyer. "I kind of wonder why you would want to bid. You don't
get a big, credible branch network, major processing capability or a
particularly powerful brand name," he said.
| 
