Shares in Bradford & Bingley tumbled another 19 per cent yesterday amid the first signs that the bank's troubles were unnerving its savers.
The troubled mortgage lender's stock dropped to 34p, way below the 55p-a-share price for its planned £400m rights issue.
B&B's rights issue is fully underwritten and is sub-underwritten by some of its biggest investors and the major UK banks. Retail deposits are guaranteed by the Government for up to £35,000. But the stream of bad news was causing concern for savers at its branch in London Wall yesterday.
Richard Spillett, 44, an investment banker, said he had moved money saved for his children from an account with six months' notice to one with easy access. "I'm obviously nervous about the situation," he said. "I'm putting it [the money] in a very short-term account so I can walk in and ask for a cheque. The [Treasury] guarantee is not very clear as to what happens with a trustee account. It is not clear if there is a delay between the bank having a problem ... and I don't think the interest is guaranteed."
Ethna Rafferty, 41, a finance manager, said she was moving any savings above the £35,000 limit to "somewhere not getting bad publicity ... It is not panic; it is just being careful".
Michael Gasher, 31, who works for the recruiter Manpower, said he was considering moving some of his funds with B&B to his NatWest account: "I'm hoping this is just temporary, but it is something on my mind," he said.
Other long-term customers were less worried. Garry Winder, 80, a former retail display manager who has saved with B&B for 40 years, said: "Every person has something different to say. There is nothing cut and dried at all. On TV just now they painted a very bad picture, but I think Bradford & Bingley will struggle and come out of it. They are that kind of company."
A B&B spokesman said: "We are a well-funded institution, funded into 2009, and we have one of the highest capital ratios in the UK banking sector." The bank said on Monday that its trading performance had not changed materially in recent weeks.
The Financial Services Authority is working to ensure B&B does not implode through lack of confidence as Northern Rock did. Bankers and analysts believe the FSA is working to engineer a takeover of the country's biggest buy-to-let lender by a stronger rival. With B&B's board under pressure and regulators still smarting from the Northern Rock affair, there is no guarantee shareholders would receive the market value of their shares, or anything at all.
Analysts said Lloyds TSB, with its UK-focused business and financial strength, was the main candidate. Lloyds is mulling a deal in Germany, but B&B would be the kind of distressed UK asset that Lloyds shareholders would like it to pick off.
"I think that [an engineered sale] is absolutely on the cards," Alex Potter, an analyst at Collins Stewart, said. "If that is what it takes to prop this bank up, they will do what they did with Midland in 1992 and organise a takeover."Reuse content