B&B returns ?150m to its shareholders

Bradford & Bingley is to hand back £150m to shareholders despite suffering a large outflow of mortgage and savings balances as carpetbaggers deserted the former building society.

The smallest of the listed mortgage banks, Bradford & Bingley is aiming to transform itself into a mortgage broker, selling other lenders' products and earning fee income instead. As this business requires much less capital, the bank says it can afford to hand money back to shareholders.

This will take the form of a share buyback over the coming year.

Profit for the year edged up 9% to £253.1m, helped by an increase in the interest margin - the gap between what Bradford & Bingley earns on mortgages and what it pays out to savers - and a 10% cut in staff numbers to 7,100.

But it saw more than £1bn pour out of its instant access and notice accounts, which were favoured by carpetbaggers ahead of Bradford & Bingley's conversion to bank status last year.

It was also a victim of remortgaging, with nearly a quarter of its traditional mortgage customers quitting in one year alone for other lenders. Its book of traditional mortgages shrank from £14.3bn to £11.1bn, but this was offset by a 40% increase in lending to £7.6bn in specialist areas such as "buy-to-let" loans.

Chief executive Chris Rodrigues said that the huge scale of price-driven remortgaging vindicates the decision to switch to higher margin broking rather than volume lending.

"Remortgaging is now a fact of life. We've seen the consumer get smart and regularly refinance their loans. But we are not going to lend for lending's sake."

Bad debt provisions and mortgage arrears fell.