Newspaper article The Journal (Newcastle, England)

B&B Kicks off the Reporting Season for Banking Sector; in Association with RBS

Newspaper article The Journal (Newcastle, England)

B&B Kicks off the Reporting Season for Banking Sector; in Association with RBS

Article excerpt

Byline: By Holly Williams

THE Bank of England's quarterly inflation report and the first of the results from the banking sector may add to stock market nerves this week.

Bradford & Bingley kicks off what promises to be a revealing bank reporting season when it posts full-year figures on Wednesday. Last summer's credit crunch will be the dominant theme for all the major players, in particular for lenders such as B&B.

The crisis that engulfed Northern Rock sent shares plummeting across the sector, regardless of business model or reliance on wholesale money markets. B&B was among those worst hit, seeing shares nearly halve in value since September.

The West Yorkshire-based lender has been at pains to reassure over its model and funding. The group sold pounds 4.2bn of loans in November at a loss of up to pounds 40m to boost cash reserves. It stressed the sale was not a desperate attempt to shore-up cash, with pounds 2.5bn of funding already secured.

B&B has also turned its attention to further building its deposit base - now the holy grail for lenders after Northern Rock's reliance on wholesale money markets was shown to be so risky.

It is expected to report a substantial slowdown in profits growth, with underlying pre-tax profits forecast at pounds 347.3m, up 3% on 2006 against an 8% hike the year before. Bad debts are also set to come under close scrutiny, with the buy-to-let market, which has grown so rapidly in the UK, seen as being ripe for defaults.

The Bank of England gave a brief glimpse into its thinking on inflation in the statement accompanying this month's quarter-point rate cut decision - and it was enough to confirm just how tough a job it has over the year ahead.

A slowing economy and soaring inflation is a poor monetary mix, but the Bank signalled that it had the added headache of a potential shift in inflation below target if the wider downturn is more pronounced than thought. …

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