Why B&B shareholders could be on to a winner

Borrowers and savers at Bradford & Bingley, which has just floated on the stock market, may do well to keep their shares as a takeover is likely

Bradford & Bingley's windfall of £618 - for borrowers or savers with a flat pay-out of 250 shares - is not a fortune, but should pay for most of the Christmas presents. And that appears to be the favoured option of almost 40 per cent of the new shareholders, who quickly sold when the shares started trading just over a fortnight ago.

Bradford & Bingley's windfall of £618 - for borrowers or savers with a flat pay-out of 250 shares - is not a fortune, but should pay for most of the Christmas presents. And that appears to be the favoured option of almost 40 per cent of the new shareholders, who quickly sold when the shares started trading just over a fortnight ago.

But the advice from independent financial advisers is hold onto your shares for the time being. Speculation is rife that B&B will be subject to takeover offers which are likely to drive the price up. Already the shares which came to the market at 249p had risen towards the end of this week to 262p. "Unless investors need the cash, Chartwell would rate the share a hold," says Craig Wetton, chief executive of Chartwell Independent Financial Advisers, based in Bath. He believes the price remains low compared with other companies in the sector and is an attractive bid target. This view is shared by Ben Yearsley, investment manager at Hargreaves Lansdown, an IFA firm based in Bristol. "At £600 or so we are not talking about a great deal of money. They will probably be taken over within the next couple of years. I'm holding onto my shares. The benefits are more tangible for a saver than for a borrower."

Nationwide are saying something similar, urging B&B borrowers to move their mortgages. Nationwide's standard variable rate is currently 7.09 per cent, compared with B&B's 7.64 per cent. The difference in interest rates will wipe out the windfall within 13 months, calculates Nationwide. Abbey National, too, are laying claim to disenchanted B&B borrowers.

"People can make up their own minds," says Chris Holland, head of corporate affairs at B&B. But borrowers who might get better interest rates elsewhere are likely to be offered an improved deal to keep their custom. "We will discuss it with them," agrees Mr Holland.

Complications arise because B&B now focuses less on lending, providing a comprehensive mortgage broking service as well. The bank sees a growing proportion of its profitable business coming from the sale of related products, such as its estate agency chain and the sale of insurance products. Existing borrowers and new clients will be given the choice of products provided both directly by B&B and those of other lenders. This is true whether customers approach the bank through its branches, or use its recently acquired subsidiary, John Charcol Brokers.

Ray Boulger, senior technical manager of mortgages at Charcol, says he is not embarrassed at being asked by B&B customers to find a better mortgage product, or offering a mortgage from another lender. He says about a quarter of borrowers (irrespective of lender) find it worth their while to pay redemption penalties to move to a cheaper mortgage, with a much higher proportion gaining from a move if there are no redemption penalties. "Check with your lender what they will offer as an existing customer and compare with what else is on the market," suggests Mr Boulger - advice which applies equally to borrowers with B&B and other lenders.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Operations Manager

    £30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

    Guru Careers: Stockbroker

    £Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

    Recruitment Genius: Financial Adviser

    £20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

    SThree: Graduate Recruitment Resourcer

    £20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

    Day In a Page

    Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

    The acceptable face of the Emirates

    Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk
    Nepal earthquake: One man's desperate escape from Everest base camp after the disaster

    Escape from Everest base camp

    Nick Talbot was sitting in his tent when the tsunami of snow and rock hit. He was lucky to live, unlike his climbing partner just feet away...
    Adopting high fibre diet could dramatically cut risk of bowel cancer, says study

    What happened when 20 Americans swapped diets with 20 Africans?

    Innovative study in the US produces remarkable results
    Blake Lively and 'The Age of Adaline': Gossip Girl comes
of age

    Gossip girl comes of age

    Blake Lively is best known for playing an affluent teenager. Her role as a woman who is trapped forever at 29 is a greater challenge
    Goat cuisine: Kid meat is coming to Ocado

    Goat cuisine

    It's loved by chefs, ethical, low in fat and delicious. So, will kid meat give lamb a run for its money?
    14 best coat hooks

    Hang on: 14 best coat hooks

    Set the tone for the rest of your house with a stylish and functional coat rack in the hallway
    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?