B&B Sells Commercial Property, Social Housing Loans
LONDON (Reuters) - UK bank Bradford & Bingley Plc BB.L has sold 4.2 billion pounds ($8.6 billion) of commercial property and social housing debt to improve group liquidity, boosting its shares as credit fears stalked other lenders.
The UK mortgage lender said on Tuesday it had slashed its exposure to commercial property by 70 percent by selling 2 billion pounds ($4.1 billion) of loans at a slight discount to the real estate arm of U.S. conglomerate General Electric (GE.N).
Earlier, Bradford & Bingley also announced the sale to Belgian financial group Dexia (DEXI.BR) of its entire 2.2 billion pound Housing Association loan book.
Shares in Bradford & Bingley were 6.6 percent higher at 1200 GMT, outperforming other European banking stocks and the broader European stock market .FTEU3, which rose 0.71 percent after closing at a three-month low on Monday.
Banking stocks have been pummelled in recent sessions and led stock markets down globally amid concerns about the fallout for the financial industry from the U.S. subprime mortgage crisis and rising credit costs.
On Monday, interbank lending rates for two- and three-month sterling deposits hit their highest level in two months.
A spokeswoman for Bradford & Bingley said it was selling most of its commercial property loan book because banks had to set aside more capital against commercial property loans compared with residential property loans under new Basel II rules coming into effect next year.
"We can make better returns on retail mortgages," she told Reuters.
Analysts said Bradford & Bingley's disposals -- about 10 percent of its overall loan book -- were a double-edged sword.
The deal would address the bank's immediate funding needs at a time when interbank lending costs had risen but would also tie its future growth prospects to the buy-to-let and self-certified mortgage sectors, analyst Sandy Chen of brokers Panmure Gordon said in a note to clients.
Other market participants agreed.
"The Bradford & Bingley issue is that they are selling a loan book which is a high quality book where they know they can get a good revenue stream," one trader said. "They sold that to keep liquidity going in a very high risk, uncertain market, so long-term that's negative."
Chen also said that the estimated pretax contributions of Bradford & Bingley's commercial property and Housing Association loan books in 2006 was slightly higher than that of its overall loan portfolio.
"Although it might have been assumed these were lower-margin books, we think that the opposite may be the case," he said.
Bradford & Bingley said it will be left with 800 million pounds of commercial property assets after the sale to GE Real Estate, which was set to produce a loss on disposal of 15 to 40 million pounds. Continued...
