B&B sinks to first-half loss

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Britain's biggest lender to landlords warned conditions would continue to worsen through 2008 as margins fall, but it gave investors some good news, announcing it had renegotiated one of two contracts that have seen it forced to acquire large numbers of loans originated elsewhere and is in talks to overhaul a contract with GMAC-RFC that has boosted arrears.

"B&B results were little short of appalling, but this was expected," analyst Alex Potter at Collins Stewart said in a research note, adding the earnings outlook was "very weak".

The mortgage lender, forced to raise 400 million pounds in a cut-price cash call this month as market conditions worsened, posted a pretax loss of 26.7 million pounds ($48.9 million). That compares with a pretax profit of 180.4 million a year ago.

Excluding a 127.8 million pound writedown on investments, losses on structured investments and some gains on debt, underlying pretax profit for the first half of 2008 totalled 70.2 million pounds, still less than half the year ago number.

The writedowns and losses combined add up to almost half the cash raised by B&B in its emergency rights issue.

B&B shares, which have lost 80 percent of their value since the start of the year, were trading down 1.5 percent at 8.50 a.m. on Friday, at 49.5p.

BAD DEBTS WORSEN

B&B's mortgage book, more than half of which is made up of loans to landlords in the so-called buy-to-let sector, has been closely watched by investors looking for evidence of worsening arrears across the UK sector, as property prices fall and consumers come under pressure.

The bank said on Friday that the number of mortgages three or more months in arrears across its book worsened to 2.29 percent from 1.48 percent at the end of December.

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