B&B mulling over split into good bank / bad bank

| October 26, 2009 | 0 Comments

Nationalised Bradford & Bingley (B&B) is reportedly considering splitting itself into two in order to raise money to repay its £18.4 billion loan from the Financial Services Compensation Scheme (FSCS).

The troubled buy-to-let lender was nationalised over a year ago to prevent it from collapse which led to Spanish bank, Santander, acquiring B&B’s £20 billion savings base and its network of 197 branches.

Meanwhile, B&B’s £50 billion loan book, including £41 billion of mortgages, was nationalised.

A similar plan is being considered at nationalised Northern Rock, whereby the Government is planning for the bank to be split into two divisions - a “good bank” of profitable assets and “bad bank” of toxic debts.

Plans to split Northern Rock into two are currently under consideration from Neelie Kroes, the European Competition Commissioner.

Northern Rock is hoping to sell some of its mortgage business in a bid to repay taxpayers.

However, a B&B spokesperson said that a split is “not something that is going to happen anytime soon.”

“If at a later date when the economy picks up we will look to sell off part of the mortgage book,” said the spokesperson.

B&B, which has one of the highest bad-debt ratios among the big banks because of its focus on buy-to-let lending, saw its finance come under threat, due to a developing run by savers who were withdrawing their money at the height of the international financial crisis last autumn.

Tags: , , , buy to let, FSCS, good bank, mortgage book, , , sell,

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