Bradford & Bingley has been forced to issue a defending statement as the city spreads rumours of a rights issue. According to city analysts, Bradford & Bingley is regarded as heavily reliant on the wholesale debt markets for funding; causing them to believe the bank may resort to a rights issue as an alternative way of raising finance.
Malicious rumours temporarily damaged HBOS earlier this year, and the failures of Northern Rock and Bear Stearns have led to a nervous economy, where the damage can prove detrimental.
In response, Bradford & Bingley quickly released a statement, denying the rumours and stating that: "Contrary to press speculation, Bradford & Bingley is not intending to issue equity capital by way of a rights issue or otherwise.
"Bradford & Bingley has a strong capital base, above its regulatory requirements, and as a result of the Board's conservative approach, has funded its business activities through 2008 into 2009," the statement continued.
Speed was of the essence as Bradford & Bingley moved quickly to issue the statement and contain the speculation. The current financial climate does not bode well for banks hit by rumours, HBOS was able to regain its stability thanks to intervention from the Financial Services Authority, but the future of several banks remains unstable.
According to experts, it is only a matter of time before banks begin raising capital through rights issues due to inadequate funding form previously rich sources such as sub prime mortgage
Despite quashing rumours of an immediate rights issue, Bradford & Bingley did not write it off altogether, commenting that: "In the current market environment, the Board will naturally continue to monitor closely the balance sheet strength of the business and its funding plans."
In February, Bradford & Bingley announced a loss of profits from £246.7 million to £126 million and confidence in the bank appears to be falling because it specialises in the buy to let mortgage
Group chief executive, Steven Crawshaw, defended the bank, commenting: "These results demonstrate the strength of our underlying business, which has performed well in a challenging year for the sector.
"With significant funding in place and our savings business continuing to attract new money, we are confident of our ability to continue to be a leading player in the specialist lending market."
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