Bradford & Bingley reveals losses

1 September 2008
Bradford & Bingley has reported a loss of £27 million in the first half of the year, as it struggles to deal with rising bad debts, mortgage fraud and high funding costs.

The struggling buy-to-let lender revealed that it had plunged £27 million into the red in the six months to July due to mortgage losses and fraud. This compared with a £180 million profit in the same period last year.

But the bank was also hit by a sharp rise in bad debts, as the number of mortgages that were three months or more in arrears increased to £56 million. It revealed that it has repossessed 717 properties worth around £122 million.

"In the light of continuing weakness in the housing market and the wider economy, we continue to expect arrears and repossessions to increase for the remainder of the year, although we will be putting further resources into tackling the problem," said the group in a statement.

The chairman of B&B, Rod Kent, said that he was very disappointed to report a loss. “Clearly, given the turbulence in the banking and the housing markets, the first six months have, to say the least, been very challenging to B&B.”

Last month, many of its shareholders snubbed a £455 million rights issue, leaving 72% of the new shares in the hands of its underwriters. According to new filings, Standard Life now owns 9.6% of the bank, Barclays 6.9%, HBOS 6.8% and Citigroup 6.5%. Lloyds TSB has 4.2% and the Royal Bank of Scotland has 3.7%.

However, the bank also needed to fork out £18 million to cover mortgage fraud caused by criminal gangs and professional fraudsters. The first bank to reveal the extent of its losses due to fraud, Kent said that most of the scams had been discovered due to falling house prices and were now in the hands of the police.

“We are no more vulnerable than other lenders to fraud, we are just being more transparent,” he said.

The crime has raised fears that other banks are sitting on millions of pounds worth of worthless loans. The Financial Services Authority has already banned 20 brokers and fined two the sum of £100,000.

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