Breaking News: Profits warning for Bradford & Bingley as CEO goes and US group buys stake
BRADFORD & Bingley has seen the departure of chief executive Steven Crawshaw and a US private equity firm taking a 23% stake in the bank as its shares plummeted this morning following a profits warning.
Mr Crawshaw’s departure, which is said to be because he is suffering from “a serious cardiovascular condition”, comes less than a month after the UK’s 10th largest bank was forced into a £300m rights issues to boost its flagging balance sheet.
Today struggling B&B – the UK’s biggest buy-to-let lender – said that US private equity group Texas Pacific Group (TPG) will take a 23% stake for £179m.
It came as the bank said profits for the first four months of the year were £56m compared to £108m for the same period last year.
The bank has restructured its rights issue to just 55p a share to raise £258m on top of TPG’s investment giving it a potential cash injection of over £400m.
Shares in the group were suspended at 8am but then restored 15 minutes later following confirmation of TPG’s purchase of its stake. The price collapsed 16% to 74p from Friday’s closing price of 88.25p.
That leaves them below the 82p price of the already deeply discounted rights issue, due to close in July.
It is believed that Mr Crawshaw – who has faced criticism after the bank denied it would be forced into raising money April, only to announce the rights issue a month later – has been suffering from angina attacks and the condition has only recently been diagnosed.
He will be replaced by chairman Rod Kent, who takes an executive role.
Mr Kent said: “The last few weeks have been challenging for Bradford & Bingley, and this is a disappointing trading update reflecting a more difficult market environment. I understand shareholders’ disappointment. Nevertheless, I am delighted to welcome TPG as a major strategic investor in Bradford & Bingley. With a strengthened capital base and the skills that TPG will bring I am sure we can develop the business to exploit the opportunities available in our markets in the medium term.”
Matthias Calice, a partner at TPG said: “Bradford & Bingley has a longstanding established franchise in the UK specialist lending market. We believe that the Company’s superior market position, coupled with this injection of capital provides the platform for potential growth and profitability. We are very supportive of Rod Kent’s appointment as executive chairman and look forward to working with him and his team to support the company’s growth strategy.”
Today’s news is likely to further fuel speculation that B&B, which has seen its shares fall by more than 80% in the last 12 months, is ripe for a takeover.
It is currently valued at around £500m compared to £3.2bn just over two years ago.
The so-called credit crunch, the downturn in the UK housing market and B&B’s heavy exposure to buy-to-let mortgages – they make up 57% of its mortgage book – have all put pressure on the bank and leave it open to a takeover bid.
City analysts suggest that Spanish bank Santander, which owns Abbey, might be interested as well as Yorkshire Bank owner National Australia Bank. TPG could also table an offer for the whole group.
The shake-up at B&B comes at the start of a critical week for UK banks, which have seen their share prices pummelled in recent days amid fears about a downturn in the UK economy and falling house prices.
The interest of a US private equity player in B&B is likely to fuel speculation that they see this as the bottom of the market for the UK mortgage sector and believe it can bounce back strongly.
