Bradford & Bingleys main business activities are: LENDING providing a wide range of loans secured on property, focussed on specialist segments of the residential and other markets. RETAIL which sells a wide choice of financial products through its branches and direct channels, including our own savings products.

            Red = 25 day moving average.           Green = 200 day moving average.

FT.com - March 13 2007
By Ben White and Michael Mackenzie in New York and Eoin Callan in Washington


Fears of subprime fallout escalate


Trading was halted in New Century Financial on Monday with the second-largest US subprime lender teetering on the edge of bankruptcy, sparking fresh fears about whether turmoil in the sector could spread and damp US economic growth.

The halt, ordered by the New York Stock Exchange, came after New Century said its banks had either cut off credit or signalled their intention to do so, increasing the likelihood of an imminent bankruptcy filing or asset liquidation.

The rapid decline of New Century, the latest problem at US subprime lenders, raised concerns that problems could spread in the $8,000bn mortgage industry and to other parts of the capital markets.

Reaction in the markets was muted. US government bonds rallied as investors shifted cash into the safety of Treasuries. Stocks edged slightly higher, though shares in other subprime lenders continued to fall.

Shares in Countrywide Financial, the fourth-largest US subprime lender, fell almost 3 per cent to $35.14 after the company said foreclosures hit a five-year high of 0.70 per cent in February and that turmoil in the subprime market could hurt earnings.

Market participants were also braced for the possibility that if New Century collapsed it could lead to broad investigations into practices across the subprime lending market.

Some economists also fear that the collapse in subprime loans could trigger wider house price falls.

In a filing with the Securities and Exchange Commission on Monday, New Century said lenders including Bank of America, Barclays, Citigroup, Credit Suisse, Goldman Sachs and Morgan Stanley had issued letters saying the company was in default.

New Century also said its bankers had demanded that it accelerate its obligation to buy back outstanding mortgage loans financed under the lending arrangements.

New Century said if its bankers demanded accelerated repurchase of all outstanding mortgages, it would cost the company $8.4bn, which it does not have.

That could lead the lenders to force a liquidation of New Centurys mortgage portfolio. New Century said such a liquidation might not generate enough capital to meet the banks demands.

Disclosure of the default letters on Monday came after Morgan Stanley last week agreed to extend $265m in fresh financing to New Century and take over a $710m credit facility from Citigroup.

In its disclosure, New Century said it had a $2.5bn repurchase obligation to Morgan Stanley. The company added that one of its lenders has said it may be willing to continue providing limited financing under its existing agreements but that such financing might be eliminated at any time.

........starting to look like the bubble is bursting. take another read of this one.




The Questor column
Edited by James Quinn
14/02/2007

Time to move out of B&B as ceiling gets too close for comfort

Bradford & Bingley
Questor says Sell

There was no clearer sign that the dotcom boom was past its peak than when cabbies started routinely offering share tips to pass the time. Running with the herd only lasts so long.

The same could be said of the buy-to-let market, which has been expanding at 20pc to 30pc annually and has grown out of nothing to account for 24pc of the private rented sector in just 10 years. Now that rental yields are compressing and interest rates rising, its attractions are rapidly diminishing.

A bursting of the buy-to-let bubble would see Bradford & Bingley shares deflate faster than a balloon. Some 58pc of its 31.1bn portfolio is tied up with professional landlords, delivering 26pc growth in new mortgages last year. The company is spreading its risk away from buy-to-let into equally "specialist" self certification mortgages to the self-employed, which registered growth of 74pc last year, but the exposure is still a worry. Few dispute that if the housing market does slow, buy-to-let is where it will be felt first.

That extra risk, though, has brought greater profits. Chief executive Steven Crawshaw makes a convincing case for a sustainable future, at least until rates rise to 7.25pc, he claims. There is no sign of house prices slipping and high employment is keeping rental levels ticking up nicely.

The extra 12bn to 15bn of mortgage-writing capability the new Basel II rules on capital reserves promises further, unfettered growth, and as long as buyers believe property is the best investment for their pension, demand will remain. It is a strong argument, but one founded in optimism. Competitors have entered the specialist mortgage market in droves recently, shaving B&B's net interest margin to 1.19pc from 1.21pc last year as full year profits fell 6.4pc to 247m before tax after a one-off 89.4m charge.

The shares, down 2 to 464p, trade on 11.2 times earnings with a 4.6pc yield. There is always the prospect of a bid with B&B and, in the short term, there is further growth to be had in buy-to-let. But the ceiling is getting ever closer and with the bump likely to be sudden, take this chance to sell.