Bradford & Bingley upbeat over lending

Bradford & Bingley, Britain's ninth-largest bank, today said the outlook for lending was improving following a cut in interest rates.

Rounding off the reporting season for UK banks, it revealed a 6% rise in pre-tax profits for the first half of the year to ?147.9m.

As banks have issued their results over the past week, analysts have focused on the issue of bad debts with the economy slowing.

Bradford & Bingley's fortunes are tied to the weakening housing market because the bank specialises in higher-margin mortgages for the self-employed and those renting out property.

The bank has around 20% of the buy to let lending sector, and some investors have expressed concern that the market could dry up or cause bad debts to surge.

However, Bradford & Bingley said confidence was returning to the mortgage market after the Bank of England cut interest rates for the first time in two years last week.

"I think we have seen the trough of that [the slowdown in UK mortgage market]. We found that, buoyed by the interest rate cut of last week, confidence has begun to resume," Steven Crawshaw, the chief executive, said.

Bradford & Bingley said arrears levels had risen to 1% of loans by value compared with 0.77% in the second half of 2004, because of the impact of higher interest rates over the past two years.

But it said arrears were unlikely to show a material deterioration and that last week's interest rates cut should have a positive impact.

Bradford & Bingley said a small charge of ?1.9m for bad debts had been made in the first half of 2005.

"Our fully-secured lending book remains high quality and low risk," the bank said. "The lending environment outlook improved during the second quarter in terms of both credit quality and volume prospects.

"We shall continue to take advantage of the good growth offered in our chosen specialist markets."