Bradford & Bingley, the demutualised mortgage provider, yesterday divulged that its flotation last December had caused delays to its business and revealed plans to cull 7 per cent of its workforce.
B&B, which employs about 6,900 people, is to cut 500 jobs from its central operations over the next 18 months, mainly in information technology and personnel functions. There will be no branch closures in the programme, which sees B&B take a one-off charge of £15m. Between one-quarter and one-half of the job losses are likely to be compulsory redundancies.
B&B needs to make cost savings as it refocuses its business away from providing its own home loans towards becoming a distributor for mortgages produced by other lenders. The latest cuts come on top of the 260 announced by the group in February.
Christopher Rodrigues, chief executive, said the moves had been on the cards since last year but the work involved in the group's flotation led to a reprieve. He said: "We are a middle-sized company and there are only so many plates you can keep juggling, and the float was the one plate that couldn't fall to the ground."
There were no plans for additional job cuts. However, Mr Rodrigues added: "I am not going to say never forever."
B&B shares slid 8.25p to 328.75p after the company posted first-half financial results that disappointed many analysts due to a meagre £7.1m increase in operating income, to £361.4m. Pre-tax profits were up 22 per cent to £119.7m. The group's maiden first-half dividend will be 4.3p a share.
Savings balances in instant-access accounts bore the brunt of carpetbaggers withdrawing windfalls after the demutualisation, declining by 12 per cent to £5.8bn. Deposits in B&B's longer-term accounts dipped 5 per cent to £6.9bn.
The results also underscored the ongoing transformation of B&B's business. New mortgage share was only 1.6 per cent, against B&B's 2.4 per cent take of the existing market. Mr Rodrigues warned that the new mortgage-distribution operation would not significantly contribute to profits for "the foreseeable future".
He echoed comments from rival lenders that the booming housing market would soften, and expected prices to rise in line with the rest of the economy from now on. Mr Rodrigues said: "We are in a low-interest rate environment, and house prices will go back to growing in line with disposable income. I am cautious about saying we're going into recession. Clearly, there will be job losses – I've done that today – but people go into other jobs and there are other jobs around."
B&B has been the subject of speculation that it may team up with another of the smaller mortgage banks, or merge with an overseas rival such as National Australia Bank. Under the terms of its float, B&B is protected from hostile takeover approaches for five years.
Mr Rodrigues said there have been no approaches and the group was chasing neither mergers nor acquisitions. It was even likely that the group would return cash to shareholders in February next year.
He said: "We [banks] talk to each other all the time, but no one's said any magical words through their lips. If someone takes a look at us and wants to make a serious offer, we would listen to that. If there's something that would add value, we'll do it, even if we have to lose our takeover protection."