B&B will split assets up to repay its loan
PART-nationalised bank Bradford & Bingley (B&B) will split up its £50bn balance sheet into “good” and “bad” assets, in a move which mirrors the restructuring plans at Northern Rock.
The group wants to sell off the “good” assets to private companies in a bid to repay its loans.
Its mortgage book was nationalised last year, and it took on an £18.4bn loan from the Financial Services Compensation Scheme (FSCS), while Spain’s Santander took on its £20bn book of deposits.
B&B has been told it must repay the loan as quickly as possible, and must also get used to functioning without government support.
At present, the amount of working capital it receives from the state stands at £8.5bn. The money is being clawed back as B&B customers pay off their mortgages.
But the bank is eager to repay as quickly as possible, which is why it is selling off some of the bank’s books of business.
B&B is particularly struggling because it has one of the worst bad-debt ratios of the big banks.
Its focus on buy-to-let lending has been a bone of contention, and so its management is keen to split off low-risk mortgages to be more attractive to a buyer, because of a low loan-to-value ratio.
The bank also wants to reinvent its image as a business which could take on other banks’ work.
It is becoming more focused on efficiencies which it will use to mange other banks’ books.
The plan to split the bank into two is being considered by the European Commission (EC) and could be given the go-ahead next week as the EC holds its final session before the expiration of its five-year term. European Competition Commissioner Neelie Kroes may put restrictions in place on Northern Rock’s capability to make new savings on the back of the government help it has had.
Northern rock could also be split up into good and bad banks, selling off the good bits to a private buyer, such as Sir Richard Branson’s Virgin group, supermarket giant Tesco, and some private equity houses.
Virgin made its interest to buy into the bank known last week.