RBS gets buy-to-let jitters as B&B hits funding crisis

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by Gill Montia

Buy-to-let lender, Bradford & Bingley (B&B), saw its shares fall to an all time low of 65.5p this morning, following the news that the bank had recorded an £8 million pre-tax loss in the first four months of the year, compared to pre-tax profit of £107 million in the same period of 2007.

In addition, the number of B&B borrowers who are more than three months in arrears with their mortgage payments has risen from 1.63% to 2.16% during the past four months and the lender says its expects the trend to continue.

B&B is in the process of raising funds via a rights issue and has also secured a cash injection from private equity firm, Texas Pacific Group (TPG).

However, the dramatic slide in B&B’s share price led Royal Bank of Scotland (RBS), which has launched the biggest rights issue in UK corporate history, to issue a statement in which it said that buy-to-let mortgages formed only 1% of its UK loan book.

RBS’ response to the trials of B&B reveal its vulnerability over the fundraising. The group has seen its share price fall by 25% since April and a further decline sparked by the B&B crisis would impede take up of the £12 billion rights issue, with disastrous consequences for the group.