B&B upbeat despite drop in lending

BRADFORD & Bingley has said its new business lending volumes in the first quarter of 2008 were lower than in the same period last year but stressed it was in a position to ride out the economic uncertainty.

The Yorkshire-based mortgage lender said the drop had been counteracted by an increase in its minimum credit requirements for mortgage applications.

Bradford & Bingley said a rise in credit impairment provisions had been introduced as a result of arrears levels continuing to rise in the first quarter.

In a statement Bradford & Bingley said: “Combined with our current assumption that house prices will fall, albeit modestly, in 2008 this has resulted in higher credit impairment provisions. We have significantly increased our management focus on collections processes and treatment of arrears cases in light of the tightening credit conditions.

“Supply has clearly become more constrained with the withdrawal of several competitors from the UK mortgage market. However, demand for buy-to-let remains robust, with landlords reporting continuing tenant demand and rising rents.”

It said margins on loans written in the second half of 2007 were affected by the liquidity crisis, which has also hit overall group margin in the first quarter of 2008. 

However, it added that it had repriced its mortgage products in recent weeks and this had widened new business margins “considerably, more than compensating for the higher cost of funds on these most recent loans” and the positive effects of this should be seen in the second half of the year.

It moved last week to quash speculation that it was being forced to raise cash through a rights issue in the wake of the credit crunch.

Steven Crawshaw, Bradford & Bingley’s chief executive, said: “The first quarter of 2008 has seen excellent growth in our retail deposit base. Bradford & Bingley has a strong capital base and has funded its business activities through 2008 and into 2009. 

“We have a focused strategy, and a business model that is adaptable to changing market conditions.

“Although the medium-term senior funding markets remain uneconomic for mortgage lenders, we continue to use the strength of our franchise to attract retail balances and access secured wholesale money using our high quality mortgage collateral.”

Bradford & Bingley said losses on its investments in certain vehicles had increased by some £38m but that its savings deposits had increased by £1.9bn so far this year. 

The mortgage lender also announced that Robert Dickie, its group operations director, resigned from its board yesterday and will leave Bradford & Bingley on April 30.