Second major UK bank 'on the brink of nationalisation'

 

British Finance minister Alistair Darling is to make a full statement on the future of troubled British
mortgage lender Bradford & Bingley before the market opens tomorrow, a British government minister has said.

"The chancellor is going to make a full statement on this before the markets open tomorrow morning. The negotiations are still under way at the moment so there's a limit to what I can say right now," Treasury minister Yvette Cooper told the BBC, adding that B&B savers would be properly protected.

Bradford & Bingley would be the second bank to be nationalised this year after Britain, buffeted by the global financial crisis, was forced to take Northern Rock into public ownership in February.

The credit crunch, sparked by losses on poor-quality US home loans, has claimed a growing number of high-profile banking victims around the world.

A report on the BBC said the decision to nationalise Bradford & Bingley, using legislation put through to deal with the Northern Rock crisis, would be announced either this evening or early tomorrow.

Bradford & Bingley's network of about 200 branches would be sold to one or more commercial banks, the BBC said.

The government said talks on B&B were still under way. "The discussions are still going on. A further statement is expected before markets open on Monday," a Treasury spokesman said.

B&B shares tumbled to a record low on Friday and the cost of insuring its debt jumped, prompting regulators to step up efforts to find potential white knights for the bank, hit by the credit crunch and Britain's sliding housing market.

The financial crisis and weakening economy have heaped pressure on British 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.

His government had to broker a rescue takeover this month when the country's biggest mortgage lender, HBOS, looked as if it might become another credit crunch victim.

The Treasury, the Financial Services Authority and the Bank of England were locked in talks on Bradford & Bingley over the weekend, officials said.

Spanish bank Santander emerged yesterday as a leading candidate to buy parts of Bradford & Bingley, sources familiar with the talks said.

A banking source said the Spanish bank was talking to the government and regulators about possibly taking over Bradford & Bingley's deposits and branch network.

Santander had no comment.

Under that scenario, B&B's £40 billion mortgage portfolio would be nationalised.

No major bank is keen to take on B&B's lending book at a time of weakening house prices, industry sources say. Santander, which already owns Abbey, said in July it was buying another lender, Alliance & Leicester, for £1.3 billion.

Other possible buyers for B&B's branch network included HSBC and Barclays, the BBC reported.

Britain's top five banks - HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS - and Santander already own about 30 per cent of B&B between them after they stepped in to help save a rights issue that flopped in June.

Meanwhile Fortis is facing a takeover or break-up as European Central Bank President Jean-Claude Trichet held emergency talks today with Dutch and Belgian lawmakers to restore faith in the Belgian-Dutch financial group.

Mr Trichet, who as ECB head is responsible for safeguarding financial stability in the euro zone, joined Belgian Prime Minister Yves Leterme in Brussels in a bid to secure the future of Fortis, including a partial or full sale or some form of state intervention, a source familiar with the situation said.

BNP Paribas and ING Group both declined to comment on reports that they could buy all of Fortis or Dutch bank ABN AMRO, which Fortis bought a year ago.

The problems at Fortis, whose shares dropped by a third last week on investor concerns about its liquidity and funding, stem from last year's €70 billion purchase of ABN with partners Royal Bank of Scotland and Spain's Santander.

Reuters