Bradford & Bingley (B&B) stunned the City of London yesterday by pulling a rights issue amid claims that poor IT systems meant its directors lacked proper visibility of the business.
The bank, the UK’s biggest buy-to-let mortgage provider, yesterday issued a profits warning and announced an £8m loss for the first four months of the year.
The warning came three weeks after B&B announced its rights issue with the board claiming that trading was in line with expectations.
Just nine days after the rights issue was launched the B&B board were told that trading conditions were considerably worse than publically announced.
The Financial Times, attributed this to “hopelessly antiquated information technology,” which it put down to "a heritage of B&B's days as a relatively sleepy building society with no shareholders to communicate with”.
Speaking to analysts, B&B’s executive chairman Rod Kent admitted, “We didn’t pick up the change in trend quickly enough.”
B&B told CIO sister title Computerworld UK it was preparing a response to questions about its IT infrastructure. The bank’s IT outsourcer, IBM, did not respond to calls.
The mortgage lender outsourced its entire IT infrastructure to IBM in 1998 under a ten year outsourcing contract.
This £100m contract was extended in 2003, adding 'on-demand' services to the deal across two business units: Charcol Online and the mortgage processing division. The move was to enable the firm to "modernise its operations".
B&B spokesperson Steven Partington quoted in the IBM case study from two years ago said, “Our relationship with IBM is not one of customer and supplier in which everything centres on price and everyone hides behind a contract.
“There are always issues with business innovation and technology. The strength of our relationship is that we make issues visible and work through them together to a successful conclusion.”