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Treasury seizes Bradford & Bingley

Created:
29 September 2008
Updated:
30 September 2008
Written by:
Jonathan Eley

You certainly can't accuse the government of indecision this time around. On Saturday, it was decided that Bradford & Bingley no longer qualified to take deposits. On Monday morning, it was nationalised - and the shares are worthless.

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The Treasury insists that action was taken to protect the overall health of the financial system, safeguard the interests of depositors and minimise the impact on taxpayers. It really, really doesn't want more queues outside branches.

Shareholders are unlikely to be as pleased, although to be honest, if you didn't see this one coming, you must have been living somewhere else. The bank was painfully exposed to buy-to-let lending and the fiasco over its rights issue merely highlighted its extreme unattractiveness as an investment proposition.

The seizure of Bradford & Bingley was executed with the speed and precision of a military coup. The UK Shareholders Association has already issued a statement deploring the action, and questioning why the company was judged to be beyond private-sector redemption just weeks after completing a rights issue. There's also the question of why Clive Cowdrey's bid vehicle was sent packing with such unseemly haste.

Abbey National, owned by the increasingly omnipresent Santander, has bought the branch network and the savings deposit base for £612m - more than twice Bradford & Bingley's market value as of Friday, but still a bargain basement price. The mortgage and loan book will be run off under state supervision - so the true cost to the taxpayer will depend on the level of default over the next couple of decades.

Get all the latest news and views on the global banking crisis at www.investorschronicle.co.uk/BankingCrisis

IC VIEW:

Surely we're done with bank bail-outs now? The four major clearing banks are bigger and less exposed to mortgage lending than the quoted former building societies, every one of which has now effectively ceased to exist in the most ignominious of circumstances.

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