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September 29, 2008    

Santander to acquire B&B‘s branches and £20bn savings business

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by Kay Murchie

The BBC reported over the weekend that troubled buy-to-let lender Bradford & Bingley (B&B) was set to be nationalised.

It has emerged this morning that Spanish bank, Santander, which recently agreed to buy Alliance & Leicester, is to acquire B&B’s £20 billion savings base and its network of 197 branches.

According to sources, talks ran late into last night and details are being finalised today by bankers and Treasury officials, according to the BBC.

A formal announcement is expected to be made this morning by Chancellor Alistair Darling, who will confirm that B&B’s £50 billion loan book, including £41 billion of mortgages, is being nationalised.

Treasury Minister, Yvette Cooper, told the BBC that the priority has been to ensure that depositors and ordinary savers, are properly protected.

As part of the sale of B&B, newly-appointed chief executive Richard Pym and finance director Chris Willford are expected to remain to transfer B&B’s shrinking mortgage portfolio into taxpayer hands.

The break-up and partial nationalisation of B&B will see the lender part ways with chairman Rod Kent and the whole team of non-executive directors.

B&B has suffered over recent times, just last week it was downgraded by Fitch Ratings from BBB+ status to BBB-, only one notch above ‘speculative grade‘, or informally known as ‘junk’. Furthermore, Standard & Poor’s downgraded the lender from A-2 to A-3.

It also announced last week its mortgage processing centre in Borehamwood, Hertfordshire, is be closed with the loss of 370 jobs.

Shares in the lender have fallen to record lows following the uncertainty surrounding it. Last year, it was trading at 300p but has plummeted to lows of 20p in the last few days.

Yesterday’s news of the nationalisation did not meet with the approval of the British Bankers Association, after chief executive, Angela Knight, who said she was unhappy that the taxpayer was having to take on the debt of B&B as well as Northern Rock.

Meanwhile, it has been announced today that Iceland’s third largest bank, Glitnir, has been nationalised after it faced short-term funding problems.

It is the first bank in the country to be nationalised since the start of the credit crunch.

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