Bradford & Bingley is being tipped as the next bank for the chopping block after reports that the Financial Services Authority was scouring the market for a 'white knight' to rescue the bank. The move comes after B&B's credit ratings were downgraded again to only one level above 'junk' status. B&B is now the only standalone mortgage lender left in the UK, but possible suitors are not queuing up to bail it out. Another possibility is breaking up the company and selling its assets.
- The reaction?
After the collapse of Lehman Brothers and rescue of HBOS, few seem surprised that B&B is on shaky ground. News that the FSA's overtures were apparently rebuffed by Santander, National Australia Bank and ING was greeted as an ominous sign by analysts. Nonetheless, B&B's share price surged 10 per cent on Monday, with investors hoping that the FSA's actions suggest a way forward will be found.
- Who are the PR players here?
B&B recently brought in City PR troubleshooter Tony McGarahan to head up comms. The bank responded to the media reports quickly, with CEO Richard Pym insisting that 'the funding foundations are very solid'. B&B also uses long-standing agency Finsbury for its financial PR.
- What happens next?
That is the £52bn question (B&B has £52bn in assets, but the bank is valued at only £401m). The FSA seems determined to shore up the banking sector and a buyout seems most likely. But reports suggest banks may be put off by B&B's overwhelmingly buy-to-let mortgage portfolio. From a comms perspective, retaining market and consumer confidence is key - at least one report warned of the catastrophic results of customers en masse taking their money out of the bank.
90% - Decline in B&B's share price over past year.