Shares in mortgage lender Bradford & Bingley perked up by 10 per cent at one stage on Tuesday - the market visibly encouraged by a series of investor roadshows this week, where management are explaining the financial (as well as geographical) differences between this West Yorkshire-based institution and another mortgage bank somewhere further up to the north east.
Here’s what institutional shareholders are being told:
B&B well placed going into liquidity crunch:
- H2 substantially prefunded
- In May/June raised £4bn from covered bond and securitisation
- Experience of 2004 downgrade by S&P led to a more balanced and diversified approach to funding by geographies and counterparties - reduced reliance on short-term bank lines
- Stringent long established liquidity policies
- Stress tested for no access to markets for 3 months
- Overseen by Balance Sheet Management Committee - comprising Chairman, NED, Group FD, Treasurer and Product Director
B&B say that when it comes to wholesale funding, debt maturing in one year is broadly equal to gross mortgage redemptions. It claims it can cover three months of lending without access to new wholesale money.
B&B response to liquidity crunch
- Repriced mortgage book in September - held fixed rates and increased variable rates by 15-40 bps
- Further reprice 18 October : Fixed rates increased by 25bps; withdrawal of “broker exclusives”
- Private placements of smaller sized covered bonds and other medium term securities - since 14 September we’ve raised £1.8bn - more in the pipeline
- Increased Savings flow with launch of a short-term bond in August and higher rate eSavings account at 6.4% in September
- Likely to reduce level of mortgage portfolio acquisitions
View the full slide show here.
