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B&B SHARES DIVE ON CASH CALL FEARS

Shares in the blank have plummeted

Tuesday May 20,2008

By Andrew Johnson

BRADFORD & Bingley shares plunged nearly 16 per cent yesterday to a new low amid fears about the bank’s £300million rights issue and future prospects in falling markets.

The bank’s value fell £130million to £692million as the shares lost 21p to 112p, less than half the 248p at which the then building society floated in December 2000.

City analysts and traders said a number of reasons lay behind the dramatic tumble at the bank, which has nearly 900,000 private investors.

They added B&B’s Steven Crawshaw had lost the City’s trust after he denied the bank was going to launch a rights issue in April, only to do so one month later. One trader said: “As a communications exercise, it comes in a little bit below a grade Z.”

There was intense speculation that a poor reaction to the rights issue, announced last week, would force the bank to cut its price, making hedge fund investors sell shares short in the hope they would fall further.

Traders said investors were also looking to sell before the rights issue, at a heavily discounted 82p a share, took effect.

However, B&B’s institutional backers are thought to support the cash call.

Analysts said the buy-to-let lender was also suffering on the back of renewed gloom about the economy and the housing market.

Royal Bank of Scotland dropped 10.5p to 256p, Alliance & Leicester 10.75p to 430.25p and HBOS 6.75p to 462.5p.

“Capital pressures are likely to rise more than the banks expected,” said Panmure Gordon’s Sandy Chen.

Another analyst said: “If you factor in slower growth and what could be a spike-up in provisions next year, it is not a pretty picture.”

Bradford & Bingley and Alliance & Leicester are thought to be the banks most at risk of short-selling, given the percentage of their shares on loan.

Stock lending is seen as an indicator of how widely a share is shorted.