B&B issues profit warning, shares suspended

Shares in Bradford & Bingley (B&B) tumbled by 30% this morning after the UK’s biggest mortgage lender, issued a profit warning.

It made an £8 million pre-tax loss in the first four months of 2008, compared with £108 million profits the same time last year. B&B said problems with its buy-to-let mortgages as homeowners struggle to repay loans, are the root of their problems.

The bank has suffered due to the property market slowdown and following the profit warning, shares were briefly suspended.

The bank, which is the eighth largest in the country, has sold a 23% stake to US private equity firm, Texas Pacific Group, for £179 million.

Furthermore, the bank is set to raise £258 million of new capital via a rights issue. The sale of the shares and the rights issue are intended to shore up its balance sheet.

Meanwhile, B&B’s chief executive Steven Crawshaw, has announced he is to step down ‘due to a serious cardiovascular condition’.

Rod Kent, executive chairman, will take charge until a replacement for Mr Crawshaw is found.

According to B&B, the number of people who are more than three months behind with their mortgage payments has increased from 1.63% to 2.16% over the last four months.

Despite the problems, bankers and regulators say B&B’s problems are not comparable in gravity or complexity to those of Northern Rock.

The former building society has over three million customers.

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