UK banking group Bradford & Bingley is to write-off £10 million as it scraps a two-year old European joint venture with Alltel aimed at developing and selling new mortgage systems.
The decision to abandon the venture was buried in a pre-close statement issued by the bank ahead of an analysts briefing this afternoon. B&B says it plans to make no further investment in the joint venture and that it will bring the servicing off its mortgage customers back inhouse.
In a statement, the companies say: "The partners believe that further investment is not justified given the current uncertainty created by changing mortgage regulation in the UK and continental Europe and the slow development of the European mortgage outsourcing market."
B&B says it will make an exceptional write-off of circa £10m this year in respect of its share of the development of the new system.
The joint venture company, known as Alltel Mortgage Solutions, was established with 600 staff from Bradford & Bingley's mortgage processing division. The services to be offered, initially in the UK but eventually across Europe, included: outsourcing of back office mortgage operations; mortgage software sales; business process consulting; and e-commerce solutions for the mortgage industry. Alltel held 75 per cent of the equity of the company, with Bradford & Bingley owning the remaining quarter.
Alltel and B&B are currently negotiating the basis on which the venture will be terminated. B&B expects to make a further exceptional charge once these negotiations are completed.
"We are confident this will be materially less than the systems write-off," says the bank.
It adds that it does not expect an increase in mortgage processing costs as a result of the changes.