UPDATE 2-UK lender B&B cuts costs, sells toxic assets

(Recasts, adds analyst reaction, background, updates share price)

By Myles Neligan

LONDON, Sept 25 (Reuters) - UK lender Bradford & Bingley Plc BB.L is cutting 370 jobs in an economy drive as the specialist mortgage lender battles the credit crunch and a sharp slowdown in Britain's housing market.

The group also said on Thursday it had sold all its problematic mortgage-related derivatives, yet its shares slumped to a new low on worries about its funding position.

B&B said the job cuts would reduce annual expenses by 15 million pounds ($27.9 million) in an austerity drive that would generate one-off costs of 14 million pounds.

By 1355 GMT, B&B shares were 12 percent lower at 22 pence, having traded as low as 21.75p, their lowest since the former building society's stock market listing in 2000. The bank now has a stock market value of about 332 million pounds.

"They're doing the right thing," said Numis Securities analyst James Hamilton. "When you're at the top of Everest in a bathing costume, the right thing to do is to huddle into a ball. But that doesn't mean you're going to survive."

The bank, seen as vulnerable to the credit crunch because of its high dependence on expensive wholesale funding, said it had sold all the remaining mortgage-backed securities it held in its Treasury division.

The securities -- collateralised loan obligations, collateralised debt obligations and structured investment vehicles -- had fallen steeply in value as a result of the U.S. sub-prime mortgage crisis, triggering hefty writedowns.