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Bradford&Bingley PLC (BB.)

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Thursday 25 September, 2008

Bradford&Bingley PLC

Bradford & Bingley Streamline

RNS Number : 2859E
Bradford & Bingley PLC
25 September 2008
 





Bradford & Bingley plc

 


25 September 2008


Bradford & Bingley streamlines operations

                    

Bradford & Bingley (the Company) today announces a series of initiatives to streamline its business operations and improve efficiency. 


Realignment of operations

Due to the wider economic environment and the significantly reduced volume of new mortgage applications, the Company is taking action to realign its cost base in three areas:

  • Closure of the mortgage processing centre in Borehamwood, Hertfordshire.

  • Significant reduction in intermediary sales team.

  • Redundancy of all remaining branch based mortgage advisors.


These actions will result in the loss of 370 roles, with a targeted annualised cost savings of £15 million and anticipated one-off costs of £14 million, the details of which are as follows.


Existing activities at the Company's mortgage processing centre in Borehamwood will transfer to the Company's larger operations centre in Bingley, West Yorkshire. It is anticipated that the workload from the Borehamwood site will be absorbed within the current staff at these central locations. Therefore, as a result of the closure of Borehamwood centre 300 staff located there will be made redundant. It is expected that the site will close in the first quarter of 2009.


As announced at our Interim results, in the first half of 2008 the Company reduced the number of mortgage advisers in the branches from 160 to 50 due to lower mortgage volumes. In order to further align the shape of the business to operate efficiently, the Company has taken the decision to remove the remaining mortgage advisers from the branch network. The Company will also restructure its Intermediary Distribution team, reducing selling and support capability to reflect its lower lending ambitions, whilst retaining a sufficiently strong presence to enable it to respond quickly to a return to growth. 


The Company has no plans to reduce the number of branches which are at the heart of the business, and will be expanding the arrears function by around 70 positions to increase collections capacity.


The Company also confirms it is reviewing its Head Office support functions to reduce its costs to a level that is sustainable in the long term. This will result in a further reduction in staff numbers.


Sale of Treasury Assets

Since 30 June 2008, the Company has disposed of a number of assets within its structured finance portfolio to minimise the risk on the Balance Sheet. All remaining CLO securities, CDO securities and SIVs have now been sold or written down to zero. This has reduced the value of our structured finance portfolio from £747m at 30 June to £494m (based on end-August mark-to-market prices for the remaining assets).  


Additionally, the Company has disposed of £40m of asset-backed securities held within its liquidity portfolio.


Following the sale and write down of the CDOs, CLOs and SIVs, the Company's structured finance portfolio consists solely of Principal Protected Notes to the value of £434m and Credit Funds of £60m.



Richard Pym, Chief Executive, said: 

"The changes we have announced today focus the business as a strong savings bank, reduce the size of our lending activities, and increase our capacity in arrears collection.


We are a strongly capitalised bank now undertaking a complex transition with regrettable job losses, but we are planning to put the problems of the past behind us and have a business which is fit for purpose going forward."


ENDS





Additional information


Sale of Treasury Assets

The combined pre-tax loss on sale for these disposals is £50.8m. The sale of these assets reduces shareholders' funds by the post-tax amount of £36.6m as many of the disposed assets have already been previously written down through the Available For Sale (AFS) reserve on the Balance Sheet. As a consequence, a pre-tax amount of £66.6m has been transferred to the Income Statement from the AFS reserve. Additionally, a number of unsold CDOs and SIVs have been written down to zero since 30 June, incurring a pre-tax impairment charge of £15.3m, and the remaining value of synthetic CDOs and CLOs was written to zero in July through a pre-tax fair value charge of £1.1m.

  

Summary Income Statement impact of Treasury Assets from 30 June 2008 to 24 September 2008


 

£m

Loss on sale

(£50.8)

Impairment

(£15.3)

Fair value charge

  (£1.1)



Transfer from AFS reserve

(£66.6)



Total Income Statement impact

           (£133.8)





Structured finance portfolio at 24 September 2008


Total £m1

AAA

AA

A

BBB

CCC & Below

Total

PPNs

434.1

53%

43%

4%

-

-

100%

Non synth CDOs

-

-

-

-

-

-

-

Synthetic CDOs

-

-

-

-

-

-

-

Non synth CLOs

-

-

-

-

-

-

-

Synthetic CLOs

-

-

-

-

-

-

-

SIVs

-

-

-

-

-

-

-

Credit funds

59.5

-

-

60%

40%

-

100%

Total

493.6

47%

38%

11%

4%

-

100%



Analysis of investment by geographic region


Total £m1

UK

Europe

US

Other

Total

PPNs

434.1

55%

40%

4%

1%

100%

Non synth CDOs

-

-

-

-

-

-

Synthetic CDOs

-

-

-

-

-

-

Non synth CLOs

-

-

-

-

-

-

Synthetic CLOs

-

-

-

-

-

-

SIVs

-

-

-

-

-

-

Credit funds

59.5

-

100%

-

-

100%

Total

493.6

48%

47%

4%

1%

100%



Analysis of investment by type of asset


Total £m1

Mortgage Backed Securities

Asset Backed Securities

Corporate Loans

Other

Total

PPNs

434.1

-

5%

79%

16%

100%

Non synth CDOs

-

-

-

-

-

-

Synthetic CDOs

-

-

-

-

-

-

Non synth CLOs

-

-

-

-

-

-

Synthetic CLOs

-

-

-

-

-

-

SIVs

-

-

-

-

-

-

Credit funds

59.5

-

-

80%

20%

100%

Total

493.6

-

4%

79%

17%

100%


Note 1: Valuation of remaining assets based on prices as at 31 August 2008


  Restructure of GMAC contract 

As announced on 23 September, the Company and GMAC-RFC confirmed that they have successfully renegotiated the terms of their mortgage forward sale agreement. 


Under the original terms of the agreement, signed in December 2006, the Company agreed to purchase a minimum of £350m of UK mortgage assets per quarter, with £1.75bn remaining to be purchased before the end of 2009. 


Both businesses have agreed to revise the terms of this agreement to their mutual benefit whereby £500m of loans will be acquired in Q4 2008 and between £225m and £250m in Q1 2009 after which the agreement will cease. GMAC-RFC will receive in lieu, the equivalent of the premium that would have been paid should the agreement have run the full term. 




Contacts:

Media Relations

Tony McGarahan

+44 (0) 20 7067 5511

+44 (0) 7501 500164

Matthew Newton, Finsbury

+44 (0) 20 7251 3801


Investor Relations

Katherine Conway

+44 (0) 1274 554928

Neil Vanham

+44 (0) 1274 806341




This information is provided by RNS
The company news service from the London Stock Exchange
 
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