In These New Times

The Telegraph

By Damian Reece

A price target of 0p has been assigned to Bradford & Bingley by brokers Pali International, highlighting the crucial question of where next for B&B.

At least analysts at Fox-Pitt Kelton (FPK) are still assigning some value to B&B’s equity (even after yesterday’s 16pc drop, adding to a 90pc fall over the past year), although they are predicting losses at the bank for 2010. Its analysts, Leigh Goodwin and Pawel Uszko, ask another pertinent question: “How much more of this can we take?”

For those who have been wandering around with the wool firmly pulled over their eyes, the FPK note adds to the more revealing and perceptive outpourings on the subject of B&B in recent days.

In reality, B&B has no future whatsoever as an independent entity. Even putting aside its capital raising, it would be facing such a serious deterioration in its business environment that a merger or acquisition by a rival would be inevitable.

The crucial thing now is for B&B to complete its £400m rights issue and bolster its capital. To fail again would be crippling, not just to B&B but also to other lending institutions, which is why there can be no wriggle room this time for the underwriters UBS and Citigroup.

That such a relatively modest sum should now become system critical to UK banking reveals what a state things are in. For B&B specifically, Thursday’s downgrade from Moody’s made its cost of doing business more expensive. The costs of funding its lending activities are going up, squeezing its liquidity position further.

The poor publicity, largely self inflicted, will make its brand less appealing to savers, which means the heroics it needs to perform on building its retail deposit base are all the more impossible. One good thing is that the Financial Services Authority seems to be fully engaged with what’s going on and appears in charge of the issues.

It must remain in full head-bashing mode to make sure all parties involved play their proper part so that the final chapter in B&B’s history is completed without further drama.

After that should come a well organised dispatch to corporate history because Messrs Bradford and Bingley, in their now tattered bowler hats, are two dead men walking.