Takeover hopes boost B&B shares

Posted by admin on 23 September, 2008 under Business news | Be the First to Comment

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