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Nationalisation Of Bradford & Bingley Big Trouble On Monday?

Bradford and Bingley, for so long, the mortgage broker's darling. Find a few active buy to let investors, send them to Bradford and Bingley to get a buy to let mortgage rubber stamped for a shady property investment and sit back and count your nice, meaty commission....easy peasy. Rinse, repeat, and retire. How a couple of years changes everything. Bradford and Bingleys assets have been nationalised and its retail deposits sold to Santander, the parent of the Santander.

Today, it's another group who are out for their pound of flesh from Bradford and Bingley...the shareholders. Most notably, the ones who put up a whole lot of cash in a rights issue earlier this year...£400m to be exact. These people are meant to be smart! The rapid deterioration in Bradford and Bingleys loan portfolio from all those easy peasy rubber stamped buy to let loans, the prospects for investors to get anything back looks more and more like hope rather than expectation.

Bradford and Bingley has a £42bn mortgage book and only about £1.5bn in shareholder equity, with some government protection in place should it need it. It would seem likely, if Northern Rock is a model to follow, that the government will take the equity against eh costs of nationalisation and wipe out all the shareholders. In reality, they are likely to end up with nothing, so retail investors in Standard Life, M and G and Legal and general will be footing a hefty bill for a key mistake, al be it a reluctant one.

But they aren't the only ones who will pay. We will all pay for this government rescue as the costs will be shared amongst the remaining banks and building societies over the next few years. The cost is estimated to be as large as $3bn to £5bn over the next several years, even if Bradford and Bingley customers repay all their loans.

Bradford and Bingley, so long the bastion of the buy to let landlord with its easy lending has paid the price for many previously high flying mutual's turned listed companies in this banking fiasco. It has stopped selling mortgages...yet another nail in the housing market.

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