B&B predicts lending growth in 2007

Bradford & Bingley. has predicted its net residential lending in the first half of 2007 will be almost double the level achieved in the same period of 2006.

In a pre-close trading statement, the mortgage lender reported a good performance in the first six months of the current year with new organic lending volumes, particularly buy-to-let, well ahead of the second half of last year.

It says this strong organic growth has been supplemented by good levels of mortgage portfolio acquisitions.

And it reports its current pipeline of new business is strong and ahead of the year-end level.

On the basis of the expected results for the half year, the Group believes it will achieve underlying profit before tax for the full year towards the upper end of the range of analysts’ forecasts – underlying profit before tax of £367.6m within a range of £358m to £377m.

Steven Crawshaw, group chief executive at B&B, says: “We’ve had an excellent start to the year, marked by very strong growth. Prospects remain good for the second half as demand continues to drive the buy-to-let market.

“Increasing returns to shareholders through organic growth, portfolio acquisitions and capital management will be our focus for the remainder of 2007.”

However, B&B reveals there has been a modest dilution in the Group’s net interest margin during the first half.

It says this was caused mainly by funding mix, which in turn is due to the very strong asset growth.

A further contributing factor is the reduction in margin on new fixed-rate mortgages, in line with the wider market, due to the sharply rising cost of two and three year money.

B&B says we expect these trends to continue during the second half, and we remain confident in our prospects for income growth.

The lender adds that, as expected, arrears levels are up slightly since the year end, due to the recent successive interest rate rises.

But overall arrears levels and credit losses remain within its expectations.

The Group also announces that it will submit its waiver application at the end of June for Basell II.

It says adopting the standardised approach to Basel II from April has improved its capacity to grow without raising capital.

The statement says: “The increases in interest rates since August last year are now showing signs of slowing the rate of growth in the housing and mortgage markets.

“However, the fundamentals of these markets remain strong. The buy-to-let sector has continued to be very buoyant in the first half of the year and we believe it will continue to outperform the mainstream market in the second half and beyond, as the supporting demographics continue to drive demand over the medium-term.”