A rise in bad debts, the departure of its operating director and further write-downs on investments were not enough to prevent Bradford & Bingley insisting yesterday it had been right to rule out fund-raisings such as a rights issue.
The mortgage lender said it had been buoyed by healthy deposit inflows from savers and strong demand for buy-to-let mortgages, despite the housing market's weakness, as competitors such as Northern Rock pulled out of the market.
Even so, B&B owned up to further hits to its racy credit investments, taking a £38m loss on structured investment vehicles and unveiling a writedown of £44m on collateralised debt and loan obligations. The bank also took a £43m reduction in the value of available-for-sale assets through its balance sheet.
The former building society said arrears levels on mortgages continued to rise as customers who had over-extended themselves failed to make payments. The arrears, combined with expected falling house prices, have pushed up bad debt provisions.
The bank said it was clamping down on payment collection and treatment of arrears cases as credit conditions tightened.
B&B also announced the departure of Robert Dickie, operations director, who resigned with effect from Monday amid speculation he is carrying the can for the lender's difficulties.
B&B repeated earlier assurances it was funded into 2009. Like other mortgage lenders, it came under pressure last year when the market for securitising home loans dried up but it has replaced that funding with private placements of debt with long-term investors. B&B has been pushing for retail deposits to replace wholesale funding and has attracted £1.9bn so far in 2008.
Along with other banks, it has been reducing its lending and raising prices to support margins and manage surges in business volumes as borrowers look for deals in the mortgage drought.
Margins in the first quarter were squeezed by funding costs and B&B's decision to hold more of its liquidity in Government bonds. But recent price increases have more than compensated for higher funding costs and should start to boost margins in the second half of the year, the bank said.
Bradford & Bingley's shares have been hit hard by concerns about funding costs, its capital position and the slowing mortgage market. The company considered a rights issue to boost its capital earlier this month, but the board decided against the move. Steven Crawshaw, the chief executive, told analysts yesterday the bank would keep capital under review but that its funding and capital positions remained healthy.
"So far the bad news has been concentrated in the group's structured finance portfolio and margin pressure due to higher funding costs. We believe that both of these problems are at or past the worst," Numis analysts said in a note to clients.
The Bank of England announced an initial £50bn injection of liquidity into the banking sector on Monday by offering to swap illiquid mortgage assets for Government securities in the hope that banks will start lending to each other again. The three-month sterling inter-bank borrowing rate barely fell yesterday to 5.885 per cent from 5.884.
Bradford & Bingley shares closed down 0.8 per cent at 163.5p.