Bradford & Bingley shares were set to plunge this morning after the company revealed the shock departure of its chief executive and an expected profit warning.
In a statement yesterday, the company said: "We can confirm that, due to a serious cardiovascular condition, Steven Crawshaw is stepping down as chief executive with immediate effect. Chairman Rod Kent becomes executive chairman while the company sets in train a process to appoint a new chief executive."
Mr Crawshaw's shock departure comes at a difficult time for the company. Already in the midst of a roadshow to convince investors to buy into a heavily-discounted £300m rights issue to shore up its balance sheet, B&B will today issue a trading statement that lays bare its financial straits.
The statement will give greater detail of the difficulties first highlighted in an interim management statement it made in April, particularly a sharp rise in accounts in arrears and shrinking margins due to rising financing costs. The company is thus likely to reveal profit projections that are substantially lower than the £160m-to-£200m range envisaged by analysts.
The developments come as a blow for a company that was singled out from the early days of the credit crunch as one of the most likely to be hit hard. Since the credit crunch took hold last summer, the company has seen more than £2.7bn of its market value, nearly 80 per cent, evaporate.
Mr Crawshaw's credibility was severely dented earlier this year when he unveiled plans for a rights issue just one month after he vehemently denied media reports that the company was planning a cash call. These latest revelations will increase the likelihood that the company could be swallowed up by an opportunistic buyer. At Friday's close, it was worth just £545m.
The executive ructions will also make B&B's effort to raise £300m in fresh capital even more challenging. UBS and Citigroup have agreed to underwrite the offering, but it is now possible that they could be left holding large swaths of unwanted shares.
On Friday, B&B's stock was trading at 88.2p per share, only 6.2p above the price at which the offering was underwritten. When it was announced in the middle of May, the 82p price implied a discount to its share price at the time of 48 per cent. B&B will hold an extraordinary general meeting on 16 June at which its investors will vote on the rights issue plan.
The lender's travails raise fresh fears about the health of the UK's banking sector. After the implosion of Northern Rock and of Bear Stearns in America, and hefty rights issues from Royal Bank of Scotland and HBOS, most analysts had concluded the worst of the pain was now behind the UK's banks. The continuing difficulties at B&B will raise fresh fears that the sector is in for further hits.
An uptick in arrears at B&B will be particularly worrying. The company has argued that the buy-to-let sector, in which it is the biggest player, was not as susceptible to the falling housing market and slowing economy as the traditional mortgage market.
With house prices falling at their fastest since the early 1990s and the spectre of widespread job losses looming, fears are growing that the number of homeowners unable to meet their mortgage payments or refinance will spike. Indeed, last week it emerged that Northern Rock was more than doubling its debt management team in preparation for that situation.
The 47-year-old Crawshaw had been at Bradford &Bingley since 1999, when he joined from Lloyds TSB. He worked on the team that floated it on the stock exchange and became the chief executive in 2004.
In the wake of the rights issue U-turn last month, Mr Crawshaw faced calls for his resignation, as did Mr Kent, the chairman. Mr Crawshaw has been diagnosed with a serious heart condition. Mr Kent will begin an urgent search for his replacement.Reuse content