Bradford & Bingley is to raise £179 million by selling off a 23% stake in its business.

Shares in Bradford & Bingley have tumbled 30% following the beleaguered bank’s profit warning issued today (2 June).

The company’s underlying profits for the first four months of the year were £56 million, compared with £108 million in 2007.

B&B has blamed “difficult economic conditions” for the decline and said it remains cautious about the rest of the year.

In a bid to boost its finances, the bank is to sell a 23% stake of its business to US private equity giant, Texas Pacific Group (TPG) for £179m.

It also plans to ask its existing stakeholders to provide £258m of new capital, through a rights issue. Shares will be offered at 55p per share.

To add to B&B’s woes, its Chief Executive Steven Crawshaw resigned this week due to a “serious illness”. Chairman Rod Kent has now been appointed Executive Chairman.

Despite the stream of negative news, Kent is optimistic about the future. He said:  “The last few weeks have been challenging for Bradford & Bingley, and this is a
disappointing trading update reflecting a more difficult market environment. I understand shareholders’ disappointment.

“Nevertheless, I am delighted to welcome TPG as a major strategic investor in Bradford & Bingley. With a strengthened capital base and the skills that TPG will bring I am sure we can develop the business to exploit the opportunities available in our markets in the medium term.”

By Natasha Piscitelli