Treasury sells Bradford & Bingley mortgage division in £5.3bn deal

A £5.3bn sale of Bradford & Bingley (B&B) mortgages, which was acquired by the taxpayer during the financial crisis, has been authorised by the chancellor.

The sale will enable the full repayment of the Financial Services Compensation Scheme loan to B&B, which the Chancellor Philip Hammond said was a major milestone in the plan to recover taxpayers’ money.

Two portfolios of  buy to let and residential owner-occupied mortgages will be sold to an investor group led by Barclays Bank. The proceeds from the sale will be used to repay the FSCS’s loan to B&B in full. The Treasury said there would be no changes to the terms and conditions of the mortgages sold and that borrowers did not need to take any action.

The sale is based on the portfolio position as at 30 September 2017, from which point the purchaser will acquire the risks and rewards of ownership of approximately 45,000 Bradford & Bingley and Mortgage Express mortgages.

Hammond said: “We are determined to recover the money the taxpayer invested during the financial crisis as soon as we can. The sale of these Bradford & Bingley loans is yet another significant step in putting the crisis behind us.

“The proceeds of this sale will go towards reducing our national debt and securing a brighter future for the next generation.”

B&B’s and NRAM Limited’s (formerly part of Northern Rock) closed loan books are managed by UK Asset Resolution (UKAR) on behalf of the taxpayer. Following today’s transaction, UKAR now owns £14bn worth of assets, down from £21bn in September 2017 and from £116bn in 2010.

The sale will raise sufficient funds for B&B to repay its loan from the FSCS – made at the time of nationalisation to finance the transfer of customers’ deposits to Santander UK – which will, in turn, allow the FSCS to repay its own loan from HM Treasury.

Financial completion is expected within the next few weeks and will enable total loan repayments of £5.3bn to HM Treasury, which includes the remaining £4.7bn of the Financial Services Compensation Scheme (FSCS) loan. This follows the repayment of £10.9bn in 2017 and means that the £15.65bn FSCS loan extended to Bradford & Bingley when it was nationalised in 2008 will have been repaid in full.

 

Ian Hares, chief executive  at Bradford & Bingley, said: “This marks a significant moment in B&B’s history with all £15.65bn returned to the FSCS and ultimately the taxpayer. When complete, this sale will reduce UKAR’s balance sheet to £14.5bn, an 87% reduction since its formation. The transaction delivers against our overarching objective to develop and execute divestment strategies which protect and maximise value for the taxpayer whilst treating customers fairly.”

The Treasury said repayment of these loans would end the need for a special levy on deposit-taking banks and marked the end of a legacy of the 2008 financial crisis.

Bradford & Bingley was formed in 1964 as a result of the merger of the Bradford Equitable Building Society and the Bingley Permanent Building Society, both of which were established in 1851.

In December 2000 the Society demutualised and floated on the London Stock Exchange but B&B, which specialised in buy-to-let mortgages, was nationalised during the recession in 2008.

Its deposits and branches were sold to rival lender Abbey, part of Santander, while its loans remained with the government.

Click here to sign up to receive our new South West business news...
Close