B&B writes down £226m

by Gill Montia

Story link: B&B writes down £226m

Bradford & Bingley (B&B), the buy-to-let lender, has written down £226 million in connection with investments in sub-prime mortgages and losses relating to the sale of its commercial property portfolio.

The value of its assets in structured investment vehicles has decreased by £64.2 million while its holdings on collateralised debt obligations have fallen in worth by £30.2 million.

As a result, pre-tax profit for 2007 is 49% lower than in 2006, at £126 million.

B&B also reported that mortgage arrears increased by 42% in 2007 while bad debts rose three-fold during the year.

The number of borrowers in arrears of three months or more increased from 4,337 in 2006 to 6,170 by the end of 2007; bad debt charges amounted to £22.5 million in 2007, up from £7.4 million in 2006.

On a positive note, total lending rose by 27% last year and B&B expects growth to continue in the buy-to-let sector, which is currently seeing tenant demand at a five-year high.

The bank has secured funding for new lending and has sufficient resources to write three months of mortgage business without returning to the money markets.

News of the writedowns was followed by a 16% drop in B&B’s share price, to an all time low of 203.25p.