B&B's buyback halts takeover talk

Bradford & Bingley sought to demonstrate to the City yesterday that it was not in takeover talks as it reported a 5% rise in interim profits.

The building society that recently converted to a bank suffered a 15.5p fall in its shares to 324.5p as merger rumours faded and disappointment emerged about the six-month figures.

Christopher Rodrigues, the chief executive of B&B, said the bank would be buying back its shares in the market - a move it would not be allowed to undertake if it was in undisclosed merger talks. The bank, which owns mortgage broker John Charcol, has been persistently identified as a target for Barclays or potential suitor for Abbey National.

"We don't need to sell this business. But I've said many times that we are a PLC. If a serious offer arose for a serious amount of money, the board would give it serious discussion," Mr Rodrigues said.

The bank, which floated in December 2000 at 245p a share, has protection from hostile takeovers for five years from the date of its stock market debut.

It named a new chairman, Rod Kent, former head of niche banking group Close Brothers, to take over from Lindsay Mackinlay in November.

The 5% rise in pre-tax profits took the total for the six months to the end of June to £129m. However, it faced criticism for making a change to the way in which it accounts for incentives for mortgage deals. This change means that it now accounts for the incentives over their lifetime rather than just 12 months, which boosted its profits by £7m. This is an industry standard, but caused some confusion as the bank did not restate its accounts for prior periods. Mr Rodrigues said that if the bank had been involved in any "trickery" it would not have highlighted the point.

The bank is trying to set itself apart by offering customers the opportunity to buy rivals' products. This is particularly the case in the mortgage market, which is enjoying a boom as a result of historically low interest rates.

Mr Rodrigues said that "only a lunatic" would predict the 20% rise in house prices would continue indefinitely, and predicted it would slow to "single digits" next year. "Over time it has to slow," he said. The dividend will rise by 14% to 4.9p.