Bradford & Bingley lost a fifth of its value yesterday despite signs its banking sector rivals could back its fundraising efforts.
Bradford & Bingley lost a fifth of its value yesterday despite signs its banking sector rivals could back its fundraising efforts.
The stock closed at 34p after a one-day fall of 19.1%, well below the 55p-a-share price of its forthcoming fundraising.
It is now worth £210m, barely a 12th of its value a year ago.
Among those to finally ditch it was Barclays Wealth, which is recommending clients use the proceeds to maintain a market weight position in Royal Bank of Scotland, which was itself down 3%, or 6.125p, yesterday at 194.875p.
Bradford & Bingley, Britain's largest buy-to-let lender, is attempting to raise £400m from investors to bolster its capital cushion after an earlier arrangement with US-based Texas Pacific Group fell through.
The fundraising is underwritten by investment banks Citi and UBS. However, further support has come from the bank's own rivals.
HSBC, Lloyds TSB, HBOS, Barclays, Abbey (which is owned by Spanish bank Santander) and Royal Bank are thought to have agreed to sub-underwrite about half of the planned issue. That could give them a 30% stake in the enlarged company.
Leading shareholders including Standard Life Investments, Legal & General, Insight Investments and M&G Investment Managers are thought to have pledged to invest another £145m.
Shareholders, 850,000 of whom are small investors controlling around a third of the firm, will be given the chance to vote on the fundraising at an extraordinary meeting on July 17.
Alliance & Leicester also had a tough day, closing down 13.6%, or 33.75p, at 214.75p as concerns re-emerged that it is facing heavy write-downs on investments exposed to the credit crunch as well as having to make higher provisions for rising defaults on its loans.
Panmure Gordon's Sandy Chen yesterday tipped it to cut its dividend and downgraded his price target for the stock from 450p to 180p. Chen said he expected an eventual take-over of the firm but added "the prospect of having to recognise write-downs on the acquired assets would also represent an effective poison pill".
The pressure the sector is under was shown by the decision of Barclays' FirstPlus, which specialises on loans against customers' homes, to close to new business from August 9.
