Sponsored by
B&B shares hit new low as default costs increase
Bradford & Bingley shares touched new lows for the second day running yesterday, and the cost of insuring against a default on its debt rose, as concerns about its ability to finance its lending persisted.
At one stage, B&B shares had sunk to 16.5p, their lowest since the former mutual floated on the stock market in December 2000. They eventually closed at 20p.
"B&B's problem is the funding gap, and then the actual balance sheet isn't very high quality," said Magnus Mathewson, banking analyst at stockbroker Hichens, Harrison.
A spokesman for B&B said the bank was one of the best capitalised in the UK, but declined to comment further. Credit default swaps (CDS) on five-year senior B&B debt were bid at 1,500 basis points but with few trades, a trader said.
That means it would cost 1.5 million euros a year to buy protection against the default of 10 million euros of B&B debt.
B&B is heavily dependent for its funding on wholesale borrowing, which has soared in cost as risk-averse banks opt to hoard their cash in the wake of the credit crunch.
The lender, which specialises in buy-to-let and self-certification mortgages, has also been hit by a sharp rise in lending arrears as a result of the downturn in the housing market.
Email to a friend
Print this page
Looking for...
Featured advertisers
Jobs
Search for a job
Motors
Search for a car
Property
Search for a house
Weather for Yorkshire
Wednesday 23 May 2012
Today
Sunny spells
Temperature: 11 C to 24 C
Wind Speed: 12 mph
Wind direction: North east
Tomorrow
Cloudy
Temperature: 9 C to 22 C
Wind Speed: 12 mph
Wind direction: North east
