Bradford & Bingley (B&B) is to cut 370 jobs because of the continuing downturn in the market for mortgages. It is shutting a mortgage processing centre and cutting its sales team that deals with mortgage brokers.
B&B is also making its remaining 50 branch mortgage advisers redundant. It said that mortgage application numbers had fallen “significantly” More job cuts are in the pipeline, the lender said, when it has finished a review of staffing at its head office.
A spokeswoman said the bank was still open for business and was not withdrawing from new mortgage lending.
“We are a strongly capitalised bank now undertaking a complex transition with regrettable job losses,” said Richard Pym, the recently-appointed chief executive.
“But we are planning to put the problems of the past behind us and have a business which is fit for purpose going forward.”
The past week has seen widespread concern that B&B may be the next bank that needs to be rescued by the authorities because of the credit crunch. It has been widely rumoured that the Financial Services Authority (FSA) has been trying to line up a “white knight” bidder to take over B&B.
The bank's creditworthiness has now been downgraded by all three of the main credit ratings agencies: Moody's, Standard & Poor's, and Fitch. Each has pointed to the bank's problem in raising funds in the financial markets and the excessive exposure of its mortgage book to buy-to-let and self-certified borrowers.
Shares in the lender are currently at a record low of just 23p, after standing at 184p in May.
Three hundred of the staff being made redundant works at the bank's mortgage processing department at Borehamwood in Hertfordshire. They will lose their jobs in the first three months of next year when their work is transferred to a larger office at Bingley in West Yorkshire.
B&B said it had no plans to cut any of its 337 High Street branches and would be taking on 70 new staff to collect repayments from the growing number of borrowers who are now in arrears.
This is not the first redundancy announcement from a major lender
The Northern Rock has cut at least 1,300 staff since it was nationalised at the start of the year.
And thousands of jobs are at risk now that HBOS, which owns the UK's biggest mortgage lender the Halifax, is in the process of being taken over in a rescue deal by Lloyds TSB.
The key issue that distinguishes the B&B from other lenders is that some of its loans to home owners have been turning bad at an alarming rate. Loans which it has made itself had a default rate of 1.78% by the end of June.
But those mortgages which it had been buying in from other lenders, such as GMAC-RFC, have a much higher default rate of 5.11%. This problem helped to push the bank into the red in the first half of the year and saw the appointment of Mr Pym, the former chief executive of the Alliance & Leicester bank, after the B&B struggled to raise an extra £400m from its shareholders during the summer to shore up its balance sheet.
This week B&B came to a deal with GMAC-RFC to avoid taking the last £1bn worth of mortgages from that lender, under an arrangement first struck in December 2006.
UK Banks have scrambled for extra funding at this week's regular cash auction by the Bank of England. Commercial banks asked for £89.2bn in the auction – far more than the £52.8bn that was available.
Strains in the money markets have risen rapidly following the collapse of the US investment bank Lehman Brothers. Banks are turning to the Bank of England for loans because it is currently too expensive to borrow from other banks as they would usually do.