B&B sinks as bad debts worsen

By Clara Ferreira-Marques

LONDON (Reuters) - Troubled lender Bradford & Bingley BB.L sank to a first-half loss, hit by 155 million pounds in writedowns and investment losses, and said bad debts had risen more than half since the end of 2007.

Britain's biggest lender to landlords warned on Friday that conditions would continue to worsen through 2008 as margins fall.

But it gave investors some good news, announcing it had renegotiated one of two contracts that have seen it forced to acquire a large number of loans during 2008 and 2009. It is also in talks to overhaul a deal with GMAC-RFC that has fuelled arrears.

The mortgage lender -- which took a 74.6 million pound bad debt charge due to rising arrears, falling house prices and mortgage fraud -- posted a pretax loss of 26.7 million pounds. That compares with a pretax profit of 180.4 million a year ago.

Excluding a 127.8 million pound writedown on investments, losses on structured investments and some gains on debt, underlying pretax profit for the first half of 2008 totalled 70.2 million pounds, still less than half the year ago number.

The writedowns and losses combined add up to almost half the cash raised by B&B in an emergency 400 million pound rights issue completed earlier this month.

"The core of Bradford & Bingley is a very solid business. Only where we have stretched credit criteria have we had a problem, and we will not do that again," the bank's new chief executive, former Alliance & Leicester boss Richard Pym, said.

"2008 and 2009 are obviously going to be tough years but beyond that we are ... well capable of riding out the current storm," said Pym, who is due to outline his vision for B&B in October.