Bradford & Bingley boss leaves as takeover of buy-to-let specialist looms

02 June 2008 / by Joy Tibbs
Chief executive at Bradford & Bingley, Steven Crawshaw, has left the buy to let provider amid rumours of serious health problems. It is thought he will receive up to £640,000 as a payoff despite fears of declining profits and a potential takeover.

The mortgage specialist has not clarified whether Mr Crawshaw has stepped down of his own volition, or whether his contract was terminated. He had been in the post since 2004, having joined the company in 1999. He had previously served at Cheltenham and Gloucester and Lloyds Bank (now Lloyds TSB).

Mr Crawshaw has been in the firing line in the last few weeks having been forced to apologise over a perceived 'u-turn' regarding the lender's financial position. Having ruled out a rights issue in the previous month, he revealed shortly after that the company would be pursuing a £300million rights issue.

Bradford & Bingley is expected to issue a profit warning today as it appears unlikely to meet analysts' earlier approximation of between £160million and £200million in profits. The company recently revealed that bad debts rose by more than 40 per cent last year.

Meanwhile, it is believed that US private equity firm Texas Pacific Group is to acquire a 23 per cent stake in the company. It is expected to invest funds worth approximately £180 million; however, the news, coupled with the announcement of Mr Crawshaw's departure, led to a major decline in share prices.

Existing shareholders are likely to be asked to buy shares worth approximately £260million in order to strengthen the company's balance sheet. The mortgage lender made a pre-tax loss of £8million between January and April but is set to raise more capital than previously anticipated with the help of Texas Pacific Group – around £400million in total, according to estimates.

A downturn in the housing market has taken its toll on Bradford & Bingley's profits, particularly as it has a share of approximately 20 per cent in the UK's £120 billion buy-to-let mortgage sector. With more people struggling to keep up with mortgage repayments and tighter lending criteria, the bank has taken a significant hit.

Head of savings at moneysupermarket.com, Kevin Mountford, said: "The latest news from Bradford and Bingley will do nothing to ease the growing uncertainty in the market generally. This ex-building society has seen its shares go into freefall over the past 12 months and recently launch a rights issue.

"Although a number of banks are suffering, as far as B and B is concerned, TPG's interest could be seen as a positive and an indication the worst is behind it.

"That said, understandably consumers will remain wary. Anyone with concerns would be wise to spread funds across a range of savings brands to ensure no more than £35,000 is invested with a single provider."

Non-executive chairman Rod Kent is to take over the position of chief executive until a replacement is appointed.

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