September 29, 2008 / 12:49 AM / 10 years ago

Santander buys B&B deposits as nationalization looms

LONDON (Reuters) - Britain is set to nationalize troubled bank Bradford & Bingley on Monday after Spanish bank Santander agreed to buy its retail deposits and branch network.

A branch of Bradford and Bingley is seen, in London on September 28, 2008. REUTERS/Luke MacGregor

B&B would be the second British bank nationalized this year and the latest in a string of high-profile banks in Europe and the United States to fall victim to the global credit crunch.

Santander will pay about 400 million pounds ($735 million) to acquire 2.7 million Bradford & Bingley customer savings accounts containing some 21 billion pounds of deposits, a company spokesman said.

It will also take over the mortgage lender’s network of around 200 branches, the spokesman said. The B&B brand will remain for now but the accounts will transfer to Abbey, a British bank bought by Santander in 2004.

Finance minister Alistair Darling is expected to announce plans early on Monday to nationalize the remainder of Bradford & Bingley, people familiar with the matter said.

The Treasury led intense talks on the rescue of Britain’s 9th biggest mortgage provider over the weekend.

The government would have preferred a private-sector buyer to acquire all of B&B, but rivals appeared unwilling to take on B&B’s 41 billion pound residential mortgage portfolio amid the global credit crisis and weakening British housing market.

B&B shares tumbled to a record low on Friday and closed at 20 pence, valuing the company at less than 300 million pounds.

This month, the British government brokered the takeover of HBOS, Britain’s biggest home lender, by rival Lloyds TSB

The financial crisis and Britain’s weakening economy have heaped pressure on Prime Minister Gordon Brown, whose party lags the opposition Conservatives in opinion polls and whose leadership has been questioned by some in his own party.

Analysts say the nationalization or takeover of lenders may lessen the availability of mortgages and exacerbate a downturn in Britain’s once red-hot housing market.


The European banking sector felt the fallout of the credit crisis as Benelux financial group Fortis underwent a shotgun nationalization on Sunday.

This followed emergency talks with European Central Bank President Jean-Claude Trichet to prevent U.S.-style financial contagion engulfing one of Europe’s top 20 banks.

U.S. lawmakers meanwhile geared up to vote on Monday to create a $700 billion government fund to buy bad debt and alleviate the financial crisis.

The B&B deal further builds Santander’s influence in the British banking market after it agreed to buy another mortgage lender, Alliance & Leicester, in July.

The Treasury said on Sunday its priority was to protect savers and provide financial stability to the British banking system.

The Association of British Insurers urged the government to maximize value from the run-down of B&B for shareholders and bondholders and said it should not be inevitable that all shareholder value is wiped out by nationalization.

The UK Shareholders Association, representing private shareholders, said it opposed B&B’s nationalization on the grounds there may be better alternatives to protect shareholders’ interests.

Additional reporting by Sumeet Desai; Editing by Anshuman Daga

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