October 6, 2008 / 3:31 PM / 10 years ago

Bradford & Bingley bail out angers shareholders

LONDON (Reuters) - Small Bradford & Bingley shareholders fear that like investors in Northern Rock they stand to lose everything after the government bailed out the bank with a mixture of nationalisation and asset disposals.

A branch of Bradford & Bingley is seen in Bingley, northern England, September 29, 2008. REUTERS/Phil Noble

The UK Shareholders Association said on Monday it had received 300 complaints from private Bradford & Bingley shareholders who have received no communication from the government about the fate of their holdings.

“The government has confiscated 1.5 billion pounds in assets and haven’t said what they’re going to do with it,” a spokesman at the UK body told Reuters.

The Treasury announced plans to take the bank’s 50 billion pound mortgage book under public administration last week and sell its deposits and branches to Spain’s Santander.

Shareholders are aggrieved that the move occurred only months after they were tapped for 400 million pounds via the group’s rights issue in July.

“The view of Bradford & Bingley shareholders is that it was a sound company and worth preserving. It could have been saved,” the group’s spokesman said.

Chancellor Alistair Darling told parliament on Monday that it was impossible to say what, if anything, would be left for Bradford & Bingley investors.

“We will do what is right, but at this stage it’s really quite impossible to say what is left, because this bank does have a lot of assets which are not worth a lot at the end of the day,” Darling said during a statement on the financial crisis.

Retail shareholders, with stakes of less than 10,000 shares, made up 25 percent of Bradford & Bingley’s shareholder base after the rights issue. It was 45 percent before the issue, but mainly institutional investors backed the fund raising.

Shareholders argue the bank was well capitalised and the government should have considered less extreme measures.

The government’s rescue plan for B&B aimed to stem contagion from the financial crisis.

“The stability of the system comes first,” Prime Minister Gordon Brown told the BBC last week.

But shareholders said the reasons behind the nationalisation were opaque.

“For some reasons that we’re not clear on, they (the government) chose not to save B&B. They chose to dismantle it instead. We’d like some explanation as to why,” he said.

Bradford & Bingley was one of Britain’s largest buy-to-let and self-certified mortgage lenders and relied heavily on increasingly expensive wholesale borrowing for its funding.

Small shareholders now fear that they will be left empty-handed, similar to shareholders in Northern Rock, which the government nationalised after a run on the bank.

Editing by Will Waterman

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