US shares clawed back some of Monday’s heavy losses, after President George W Bush renewed calls for Congress to back a $700bn (£380bn) banking rescue plan.

With Wall Street having seen record falls after Congress blocked the deal, the Dow Jones index rose 345 points or 3.3% by mid-afternoon on Tuesday.

Analysts said investors were hopeful a new deal could be agreed this week.

Mr Bush warned that if agreement is not reached, the US economy faces “painful and lasting damage”.

‘Urgent situation’

“We are in an urgent situation and the consequences will grow worse each day if we do not act,” Mr Bush said at the White House.

“It matters little what path a bill takes to become law. What matters is that we get a law.

“We’re at a critical moment in our economy.”

While the Dow Jones reached 10,711.3 points, the other main Wall Street index – the Nasdaq – had advanced 3.8% to 2,060 points.

On the back of the strong gains, European shares closed ahead.

The UK’s FTSE 100 added 1.7%, 83.4 points to 4,902.5, France’s key index added 2% to 4,032.1 points while Germany’s Dax ended 0.4% higher at 5831 points,.

Earlier, Japan’s Nikkei index ended Tuesday down 4.1%, while Hong Kong’s Hang Seng rose 0.8%.

Oil, which had fallen by about $10 a barrel on Monday, also rallied.

Expectations that politicians would pass some form of financial stability plan gave investors hope that demand for energy would increase.

US light, sweet crude rose by $3.88 to $100.25 a barrel while London Brent crude added $3.63 to $97.61.

‘Not dead’

Analyst Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said European investors were hopeful the US would eventually pass the bail-out plan.

“This deal is not dead in the water and there are hopes that when Congress reconvenes it could still go through,” he said.

There were a number of other key financial events on Tuesday:

– In Russia, trading was temporarily suspended on the country’s two main stock markets
– In the Republic of Ireland, the government announced that all bank deposits would be guaranteed for the next two years
– European bank Dexia has received a state bail-out, costing the Belgian, French and Luxembourg governments a combined 6.4bn euros ($9.2bn; £5bn)
– Several banking stocks fell on the FTSE 100 index, with HBOS down 13.8%, Barclays losing 2% and Royal Bank of Scotland slipping 1.1%
– Day of turmoil

The US rescue plan, a result of tense talks over several days between the government and lawmakers, was rejected by 228 to 205 votes in the House of Representatives.

“I know we need a strong financial sector, but where is the talk of structural change that’s going to prevent recurrence?” Neil, California, US

Send us your commentsAbout two-thirds of Republican lawmakers refused to back the rescue package, as well as 95 Democrats.

Congress will not meet again until Thursday – after a break for the Jewish New Year – with another vote unlikely before the weekend, the BBC’s Jonathan Beale in Washington says.

The House’s rejection of the bail-out plan came after a day of turmoil in the US and Europe, with Wachovia, the fourth-largest US bank, being bought by larger rival Citigroup.

Monday also saw the partial nationalisation of Benelux banking giant Fortis by three governments, and UK lender Bradford & Bingley was taken into state ownership.

News reported by The BBC

Britain’s building societies could face a bill of more than £80m after the rescue of the Bradford & Bingley bank.

The Government provided £14bn to protect the deposits of Bradford & Bingley’s 2.6 million savers.

The interest on that loan will be paid by all firms that take savers’ money, including the 59 building societies.

The director general of the Building Societies Association (BSA) Adrian Coles said it was “galling” that societies and their members had to pay.

The £14bn loan will eventually be repaid as Bradford & Bingley’s mortgages are redeemed.

But the interest which will accrue in the meantime will be charged each year to the 700 financial companies which take deposits.

Proportion

The Financial Services Compensation Scheme confirmed to the BBC that the 59 building societies would be included in that number.

“It is galling that those institutions that behaved prudently…are now being called upon to pay some of the bills of those institutions that were far less prudent” Adrian Coles, BSA

It said each firm had to pay in proportion to the deposits it held, and that the societies between them had to pay about 18% of the cost.

The Treasury estimates that the interest on the loan will amount to £450m in 2009. That means the societies will have to find £81m to pay the first year’s interest.

Adrian Coles, director general of the building societies’ trade association, told the BBC he believes that is unfair.

“It is galling that those institutions that behaved prudently in the housing market upswing are now being called upon to pay some of the bills of those institutions that were far less prudent.”

‘Significant bill’

According to the BSA, no society has failed since its records began in 1945.

“We will need to examine all the aspects of this over the next few weeks to see what options there are to protect building societies and their members from what could be a significant bill,” added Mr Cole.

The interest due in 2009 cover seven months from the end of September this year to the end of March.

In 2010 a full year’s interest will be due and that could be almost twice as much.

Since building societies are mutual organisations with no shareholders, their members will end up paying the bill either through higher charges or lower interest rates on saving accounts.

News reported by The BBC

Troubled bank Bradford & Bingley, which has seen its share price crash, is to be nationalised, the BBC has learned.

Officials from the Treasury and the Financial Services Authority (FSA) have been in talks with executives from the bank in a bid to secure its future.

BBC News business editor Robert Peston says the Treasury will then speedily sell B&B’s 200 branches and its savings business to a bank or number of banks.

But the British Bankers Association is unhappy at some aspects of the plan.

‘Difficult choices’

Association chief executive Angela Knight told BBC Five Live she was not happy the taxpayer was having to take on the liability of B&B as well as Northern Rock.

She said: “I’m not comfortable with that, I don’t know anybody who is comfortable with that. There’s a series of difficult choices here.

“The financial services industry underpins, not just the UK economy, but indeed all of us individually, and there can be times where authorities have to step in.”

She added that it was a “very great shame that it’s got to this place”.

But our business editor said that B&B was getting “perilously close to a funding crisis… there had to be a solution”.

Loans nationalised

B&B’s share price has plummeted and it has announced plans to cut 370 jobs due to a downturn in the mortgage market.

“Why don’t they have the sense to nationalise the things that matter – Water, Electricity, Gas, Railways etc, etc” Colin, Plymouth, UK

The bank will be nationalised using special legislation the Treasury put through when it took Northern Rock into public ownership earlier this year.

The measure is expected be announced on Sunday night or Monday morning.

The Treasury and FSA will negotiate with banks interested in buying parts of B&B. Possible buyers included Santander of Spain, HSBC and Barclays.

Santander, which already owns Abbey and Alliance & Leicester, has been looking at B&B for some time.

“The nationalisation and break up of Bradford & Bingley will represent a momentous event in the history of British banking” Robert Peston

B&B’s £50bn of loans, including £41bn of home mortgages, will not be sold and will be nationalised on a long-term basis. The mortgages may be given to the nationalised Northern Rock to manage.

The bank experienced significant withdrawals of cash from its branches and online bank on Saturday amid customer concerns about its situation.

‘Less vulnerable’

The Treasury’s decision to sell B&B’s savings business means depositors and savers’ money should be safe.

“In terms of UK banking problems, the nationalisation of Bradford and Bingley should be the last of the banking accidents here,” our business correspondent said.

He said there was a class of bank that had relied heavily on the mortgage market – Northern Rock, HBOS, and B&B – and which had now either been nationalised or taken over.

“The remaining banks have much broader bases, they are less vulnerable,” he added.

However, B&B’s shareholders and holders of its subordinated debt may lose out.

Our business editor says the nationalisation and break-up of B&B represents a momentous event in the history of British banking.

“We can assure customers that their deposits are safe with Bradford & Bingley” Tony McGarahan Bradford & Bingley spokesman

He said: “It will mean that every building society that floated on the stock market in the wave of demutualisations of the past two decades will either have collapsed or been sold to a conventional bank.”

B&B was close to seeing a demand from depositors for the return of billions of pounds, which it would have been unable to find.

Credit rating agencies had been downgrading the rating of its covered bonds, a form of funding which involves packaging up mortgages for sale to investors.

Liberal Democrat treasury spokesman Vince Cable said: “There doesn’t seem to have been a white knight in the offing. The alternative otherwise was just to let the thing go bust and protect the depositors”.

Bradford & Bingley spokesman Tony McGarahan said discussions were taking place and an announcement would be made before the stock market opened on Monday.

“We can assure customers that their deposits are safe with Bradford & Bingley,” he said.

News reported by The BBC

Shares in Bradford & Bingley (B&B) climbed strongly in early trading on Monday, amid reports that it could be the next bank in line for a takeover.

Several reports suggested that the Financial Services Authority (FSA) has been holding talks with potential buyers, should B&B hit difficulties.

However, The Times said there was no firm interest so far, despite the overtures of the City watchdog.

The HBOS takeover by Lloyds TSB was given FSA and Treasury encouragement.

B&B shares were up as much as 10%, but ended the day 1.7% higher at 28.25 pence.

Royal Bank of Scotland shares were also up- which analysts said was on the back of plans for the US Treasury to create a ’super-bank’ to buy mortgage-related debts from financial institutions.

Banks eligible to dump their toxic investments into this Treasury-backed bank would include RBS, which has a big retail business in the US.

“The absence of any such bidders so far adds to the uncertainty about B&B’s future” Sandy Chen Analyst, Panmure Gordon

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‘Bad sign’

According to the Sunday Telegraph, the FSA has been in contact with Abbey’s Spanish owner Santander, which recently bought Alliance & Leicester.

And the regulator has also been in touch with Dutch banking group ING and National Australia Bank – owner of Yorkshire and Clydesdale banks – to gauge interest, the paper said.

But the lack of firm interest was a “bad sign” said Panmure Gordon banking analyst Sandy Chen.

He warned that uncertainty could even lead to B&B customers taking their money out of the bank.

“The absence of any such bidders so far adds to the uncertainty about B&B’s future, in our view,” Mr Chen added

“Our concern is that significant retail deposit outflows may occur, forcing B&B to rely even more heavily on expensive wholesale funding.”

B&B has been badly hit by the credit crisis and a sharp downturn in the buy-to-let market.

It reported a loss of £26.7m for the six months to the end of June, against a £180.4m profit last year.

This included a sharp rise in credit impairment charges for the six months to £74.6m, up from £5.3m in the same period last year.

B&B recently completed a £400m share rights issue in order to improve its balance sheet.

News reported by The BBC

Bradford & Bingley (B&B), a buy-to-let loans specialist, has reported a loss for the six months to 30 June, with impairment charges up sharply.

B&B reported a loss of £26.7m for the period, against a £180.4m profit last year, and said it remained “cautious”.

Credit impairment charges for the six months rose to £74.6m, up from £5.3m in the same period last year.

B&B recently completed a £400m share rights issue in order to improve its balance sheet.

B&B’s shares closed down more than 2% at 49 pence.

Access to credit

“As a focused business within a sector that is currently going through a cyclical downturn, Bradford & Bingley has experienced a particularly challenging first half,” said the lender.

“We have witnessed unprecedented financial dislocation, with wholesale medium-term funding markets being difficult to access since last summer”.

B&B’s rights issue had to be restructured twice after initially failing to attract sufficient interest.

Private equity firm Texas Pacific Group (TPG) had been about to invest in the bank but it withdrew when credit agency Moody’s downgraded B&B’s debt rating.

B&B’s impairment charges for the first half of 2008 soared largely as a result of a rise in the number of mortgages in arrears for three months or more.

The lender said has seen arrears increase and said it “anticipated this trend to continue throughout the second half”.

The firm said it was taking steps to detect early arrears cases and improve collection.

‘Favourable conditions’

Looking ahead, B&B said it would focus on higher quality loans and maintain a “prudent approach to funding”.

While the bank is still going to focus on the buy-to-let market, it said it would reduce the volume in the second half until “more favourable conditions return”.

In June, Steven Crawshaw resigned from his role as chief executive due to health problems. He was replaced earlier this month by Richard Pym, the former head of Alliance & Leicester.

News reported by The BBC

The majority of shareholders in Bradford & Bingley have rejected the chance to participate in the group’s tortuous rights issue, picking up only 28 per cent of the £400m offer, as the clock starts ticking for the underwriters to offload the rest.

The news came on the day that B&B confirmed that Richard Pym, former head of Alliance & Leicester, is to take over as chief executive, a move that has been welcomed by the City.

B&B yesterday announced that shareholders had picked up just over 230 million, or 27.8 per cent, of the shares issued via the rights issue launched last month. The take-up of the offer, which closed at 11am on Friday, is ahead of the 20 per cent predicted last week.

A spokeswoman for the bank said the management was happy to have concluded the process and that the group was “on the road” to recovery. “It has been a tough process but we got there in the end,” she added. Bruce Packard, an analyst at Pali International, added: “It could have been worse.”

The take-up of shares does not affect B&B, as the issue was fully underwritten, guaranteeing it the full sum. The underwriters Citigroup and UBS will now start looking for subscribers for the remaining 597 million shares or face buying the shares themselves. The deadline for syndicating is 3.30pm on Friday.

The two powerhouse banks, whose fees amount to 10 per cent of the total issue, will not take the full hit as they have already called in UK banks and leading B&B shareholders to act as sub-underwriters. The sub-underwriters comprise Abbey, HBOS, Barclays, Royal Bank of Scotland, Lloyds TSB and HSBC, which between them could be left with a fifth of the increased share base.

B&B remains one of the most shorted stocks in the market, with 51 million shares out on loan, according to Data Explorers. It is possible that – as with HBOS’s rights issue – some of the underwriters could be selling the stock short. The move, which benefits from the share price falling, provides a hedge against being left with the rump of the unsold stock on an underwriter’s books.

The lead investors Legal & General, Standard Life, M&G and Insight are understood to have taken their full allocation of 14 per cent.

One source close to the process said that some of the retail investors did pick up shares, despite predictions that few of the 950,000 would buy in at the levels seen last week.

Fears for the success of the issue grew last Wednesday, as B&B’s shares fell below the 55p per share rights price, but B&B directors will be happy that the take-up did not go as badly as the process at HBOS, where only 8.29 per cent of investors exercised their rights. In contrast, close to 95 per cent of shares were taken up in RBS’s rights issue earlier this year.

One banking source said the feeling was one of relief that the process was over. It has been long and tortuous, with the issue failing twice before they finally got it away. Questions remain over B&B’s future, with some suggesting it could be a takeover target.

Shares in B&B closed at 54p, down 0.75p, yesterday.

News reported by The Independent

Richard Pym, the former head of Alliance & Leicester who was yesterday confirmed as the new chief executive of Bradford & Bingley, is to be paid £2.25m by next summer as he attempts to bring the beleaguered bank back on track.

B&B revealed his basic salary will be £750,000 per year with a guaranteed £750,000 bonus and the same value in B&B shares by next July. He will also be handed a large share options package.

Mr Pym, who left A&L in July 2007 after 15 years, is locked into a contract at B&B for a minimum of two years. He must also provide a full 12 months notice should he wish to leave after that.

B&B chairman, Rod Kent, who has been running the bank since Steven Crawshaw stepped down in June complaining from heart problems, said yesterday: “It has been a key priority for the board to find a new chief executive, and we believe that Richard Pym is ideal for the role.”

Mike Trippitt, of Oriel Securities, said Pym was generally well regarded and “seen as having played a good hand with the cards he’d been dealt at Alliance & Leicester”. He continued: “We see his appointment as good for restructuring B&B and good for negotiating at the right time an orderly exit for B&B.”

Mr Pym, who said in 2004 that buy-to-let mortgage specialists could be heading for disaster, as well as the danger of self-certification mortgages, had agreed to take over as chief executive of the troubled Northern Rock earlier this years, if private equity group JC Flowers had gone ahead and bought the bank.

News reported by The Independent

The number of people instructing letting agents to rent out their homes rose at a record pace during the second quarter of 2008, as increasing numbers of would-be property sellers struggled to offload their home at a reasonable price.

According to the Royal Institution of Chartered Surveyors’ (Rics) quarterly residential letting survey, published today, the number of new instructions received by letting agents increased at the fastest pace in the survey’s 10-year history, providing the evidence that increasing numbers of homeowners are deciding they would rather rent out their property than sell it at a knock-down price.

Some 43 per cent of chartered surveyors reported a rise in instructions over the quarter, up from 30 per cent during the first three months of the year.

“The lettings market is booming, with many vendors opting to rent their property while sales in the housing market continue to dry up,” said James Scott-Lee, a spokesman for Rics. “Many are willing to ‘hold’ and await the return of capital appreciation. Becoming a landlord is now an increasingly profitable option with rising rents and yields offering good returns.

“Established investors have been reaping the benefits of the housing downturn for some time and will continue to do so in the short term. However, ever-increasing supply could have an impact on rental growth as tenant options increase.”

Property prices have fallen by almost 10 per cent over the past year, and much faster in some areas of the country, as the number of buyers has fallen sharply. Meanwhile, rents have been slowly increasing in most regions, improving prospects for amateur landlords.

However, the growth in the number of new landlords will put further strain on the buy-to-let mortgage sector, which is already struggling to meet demand. Bradford and Bingley and Paragon, the sector’s two largest lenders, have pulled back from writing any significant volume of new business in recent months, creating a glut of supply. According to Moneysupermarket.com, the financial comparison site, the number of buy-to-let mortgage products on offer has fallen from more than 4,300 to just over 300 over the past year, meaning only those with excellent credit records and a significant amount of equity in their homes are being accepted for new loans.

David Hollingworth of London & Country, the fee-free mortgage adviser, said homeowners need to think carefully before deciding to become an amateur landlord. “This is a drastic measure, and will usually result in taking on a much greater level of mortgage debt than originally planned at a time when credit is more expensive and not as freely available.”

“Borrowers need to fully understand the costs and risks that come with being a landlord before putting additional stress on their finances. Both properties are likely to be subject to larger mortgages, and payments need to be met whether there are tenants in place or not.”

The growing number of new amateur landlords has created a two-speed market, with many amateur buy-to-let investors now trying to exit the market in response to the collapse in prices.

Thousands who bought properties over the past few years are still struggling to generate enough rent to pay their mortgages – and are now facing even higher borrowing costs when they come to refinance. While they had hoped a continued rise in capital values would help them to achieve a profit, the collapse in the market has encouraged many to sell.

Meanwhile, the number of landlords defaulting on their mortgages has risen sharply over the past few months, and Bradford & Bingley has predicted that the market may only get worse during the second half of the year.

News reported by The Independent

Bradford & Bingley (B&B) has said that more than a quarter of the shares offered under its £400m rights issue have been bought by shareholders.

The bank said that 27.8% of its new shares, which were on offer at 55p each, had been taken up by investors.

Other UK banks, including HBOS, Royal Bank of Scotland and Barclays, have sought to raise extra cash after being hit by the credit crunch.

Separately, B&B announced Richard Pym as its new chief executive.

Lacklustre performance

Despite B&B’s rights issue proving more successful than some recent rights issues by other banks, almost £300m of its new shares will be left with underwriters.

The underwriters – Citi and UBS – will now try to place the remaining shares by Friday.

The two investment banks are being supported by four major shareholders and six banks – HSBC, Lloyds TSB, HBOS, Barclays, Abbey and Royal Bank of Scotland. This could mean that some of the UK’s main High Street banks will end up owning a chunk of B&B.

The news comes as B&B announced it had appointed Richard Pym its new chief executive with immediate effect.

Mr Pym was a former group chief executive at Alliance & Leicester and retired in July 2007.

He is currently an independent non-executive director of asset management group Old Mutual and a non-executive chairman of car parts retailer Halfords.

Despite Mr Pym’s credentials, he is likely to face a tough ride at B&B, observers say.

“[Mr] Pym is a safe pair of hands, in our view, to try to shepherd B&B through the coming asset quality problems we feel it will suffer. However, we also feel he can do little to avert said problems,” said Collins Stewart analyst Alex Potter.

Troubled rights-issue

B&B’s rights issue has been restructured twice. The bank first announced an attempt to sell shares at 82p in May.

Then, as trading took a turn for the worse, B&B announced it had decided to sell a 23% stake in the firm to Texas Pacific, but the private equity firm later backed out.

WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

Earlier this year, the Royal Bank of Scotland raised £12bn from its shareholders with a strong take-up in its rights issue of around 95%.

Barclays secured £4.5bn in new funding from a range of foreign investors, but only 19% of its new shares were taken up by existing investors.

Last month, HBOS said that only 8% of the new shares on offer were taken up in its £4bn rights issue.

In its statement, B&B added that there had been “no material change” in either current trading or the outlook for the company.

It is scheduled to release its six month results to 30 June on 29 August.

News reported by The BBC

Bradford & Bingley is poised to reveal that it has appointed Richard Pym, the former boss of rival Alliance & Leicester, as chief executive.

The struggling bank could announce his appointment as early as today, but a Bradford & Bingley spokeswoman declined to comment on the speculation yesterday.

B&B has been searching for a new boss since June, when Steven Crawshaw quit as chief executive due to ill health. The chairman, Rod Kent, has held the helm as acting chief executive during a turbulent time, which has involved a bungled rights issue that was finally implemented last week.

The appointment of Mr Pym is likely to go down well with the City, as he is regarded as a respected City veteran who spent 15 years at A&L before stepping down last summer. He was also lined up to be the chief executive of ailing Northern Rock, as part of JC Flowers’s failed attempt to buy the troubled lender.

Some City analysts have speculated that B&B, which is heavily exposed to the buy-to-let market, could take the route of A&L and agree to a takeover, although there is no indication that this will happen and it is unclear who may be interested in bidding.

A&L, which was also heavily exposed to the troubled mortgage market, agreed to be acquired by the Spanish bank Banco Santander last month.

Mr Pym faces a stiff test to turn around the fortunes of B&B, which has been beset by troubles since the spring. In May, it unveiled a rights issue, but this had to be restructured twice, first when it issued a profits warning and then when the US private equity house TPG withdrew its offer to inject fresh capital in exchange for a stake in the bank.

Last week, it is understood that institutions had only taken up an estimated 20 per cent of the rights issues’ available stock. The rights issue was intended to raise £400m. As a result, much of the remaining slack will be taken up by UBS and Citigroup, the underwriters, as well as six other banks and four leading shareholders who signed up as sub-underwriters: Standard Life, Legal & General, M&G and Insight.

Bradford & Bingley’s shares closed at 55.25p on Friday, marginally above the 55p issue price.

News reported by The Independent