Shares in Bradford & Bingley hit record lows yesterday over fears it could become the second UK bank this month to lose its independence or face collapse.
B&B's share price plunged at one point to 16.5p on the day, wiping off a fifth of its value and marking a 94 per cent decline since a year ago. The stock did rally, closing 5.88 per cent lower at 20p.
Investor confidence in B&B, Britain's eighth-biggest mortgage lender, has been rocked this year by the weakening UK property market and its high levels of debt. The share sell-off intensified yesterday from investor concerns over its funding and delays to the Federal Reserve's $700bn emergency bailout package in the US.
This comes just over a week after HBOS was brought to its knees. The bank's shares plunged over escalating fears of its bankruptcy, forcing one of the most recognisable names on the high street to seek an emergency £12bn takeover by rival Lloyds TSB.
Fears increased yesterday that B&B would be the next institution needing intervention to stave off collapse. While depositors are likely to have their savings safeguarded, shareholders face the prospect of the entire value of their holdings disappearing.
James Hamilton, an analyst at Numis Securities, said: "It is not inconceivable that Bradford & Bingley could go under. It's possible that, if a deal is being engineered, rather than a bidder just coming out and making an offer, the value for shareholders could be next to nothing."
The Financial Services Authority (FSA), the UK's markets watchdog, has been locked in talks to save B&B for some time, according to a source close to the situation. "There are back-room machinations going on to bring an orderly end to the Bradford & Bingley story," another said.
There has been talk that the FSA was sounding out potential buyers for the business, with names rumoured to include the Spanish banks BBVA and Santander, National Australia Bank, ING and HSBC.
The regulator was keeping its cards close to its chest yesterday, refusing to confirm the state of talks. One analyst said: "The FSA has to be looking at this. I can't believe they are sitting watching without putting together some sort of plan. Even so, it would presumably be pretty brutal for B&B and there would be some fallout for jobs. For shareholders it's all over."
B&B's latest problems come a day after it announced its intention to cut 370 jobs, predominantly in the mortgage-processing centre in London. Its chief executive Richard Pym announced the move as part of his plan to maintain the bank's independence.
Elsewhere, HSBC announced it was to slash 1,100 jobs at its investment banking operations, blaming the current economic climate. Of those, about 500 are expected to come from the UK.Reuse content