Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of YourPropertyExpert.com

Bradford and Bingley, Alliance and Leicester – both in better shape than had been feared

Posted by markharrison on November 29, 2007

According to a report from the BBC, both Alliance and Leicester and Bradford and Bingley have issued trading statements today that show them to be in better shape than had been feared.

The good news is that both of them, while they’ve both made some losses (see my post about securitisation earlier this week), they’ve also both got good cash reserves and borrowing facilities lined up.

As a result of this, no-one is expecting another Northern Rock-style run on those banks.

Both are blaming the American subprime crisis for the downturn (as you’d expect), but there’s a hint of naivety from one of them : Alliance and Leicester have apparantly blamed “unprecedented conditions”. Clearly they don’t have good enough memories, and are basing conditions on the relatively short period of time since the second world war… Looking back to the US experience in the 1930s, there are lots of precedents for what’s been happening.

Bradford and Bingley have been more impressive to my mind. They’ve taken their losses, but are still in good condition. Their Chief Executive, Stephen Cranshaw said:

“We have taken the view that we should take our funding when we can and we got in some early funding deals when the windows were open, so we are padded up for the long haul.”

Rates for mortgages (especially in Buy to Let, which was a core business for B&B) are still expected to rise, though… but at least (hopefully) no more runs on major banks. (Though I wouldn’t be surprised if more smaller ones go the same way as Northern Rock, Paragon, and Streetcred).

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