B&B Wants £300m More From Its Investors

4:59pm UK, Wednesday May 14, 2008

Mortgage bank Bradford & Bingley has become the latest lender to ask its shareholders for more cash.

Firm says needs more capital

The company has announced plans for a rights issue, in a move aimed at raising £300m to bolster its balance sheet.

This will see shares offered at a 48% discount to the company's share price on Tuesday night.

It  follows similar action by larger banking groups Royal Bank of Scotland and Halifax Bank of Scotland - RBS wants £12bn, HBOS is asking for £4bn.

Bradford & Bingley denied as recently as last month that it was planning to carry out a cash call.

However, it has now said the move will reinforce its position as one of the UK's "better capitalised" banks. 

The former building society, which listed on the London stock market in December 2000, will offer 16 shares for every 25 held, at a price of 82p.

Around 35% of the company's shares are in the hands of private investors, who have holdings of up to 250 shares.

Many of these shareholders are former members who picked up stock when Bradford & Bingley demutualised.

The latest rights issue comes as banks look to strengthen their balance sheets after incurring losses on securities backed by US mortgages.

Bradford & Bingley has come under the funding spotlight given that it previously raised more than a quarter of its capital through the wholesale money markets before these effectively dried up.

This triggered the problems that ultimately led to the nationalisation of Northern Rock.

However, the group has recently made moves to raise capital and reduce its reliance on credit markets.

It sold £4bn in loans to boost cash reserves, and has switched focus to lower-risk lending and increased savers' deposits, taking in £1.9bn during the first quarter of this year.