BRADFORD & BINGLEY has become one of the most unpopular companies on the stock market, with traders staking nearly £240m on the chance that its share price will fall.

Fears that the British bank might be forced to slash its dividend or issue a profit warning due to recent market turmoil has led to growing pessimism about the stock.

“B&B has got a yield of more than 8% and the shares are worth just six times earnings,” said one dealer. “So traders are thinking, forget the dividend; this stock is trading like its next call is to the Bank of England.”

Shares in the company fell to 258Äp last week from highs of 435½p in mid-August. Analysts had been forecasting dividends of nearly 22p a share. Now, with the turmoil that prompted the collapse of Northern Rock, there are serious doubts that this level can be sustained.

Nearly 15% of the company’s market capitalisation of £1.6 billion is on loan, according to the latest figures from Data Explorers. Experts say most of the stock on loan is being used to cover short positions.

B&B insiders have played down the threat of a profit warning and a funding crisis. The bank relies on wholesale markets for about 50% of its financing needs, as against 75% for Northern Rock. B&B has said it has enough funds to see it through to the end of the year. It is thought to be planning to tell shareholders in the next few days that it has raised £1.75 billion in the past three weeks.

Alliance & Leicester is also unpopular, with 14%, or £437m, of its £3.12 billion market value on loan. Both banks now have more of their stock on loan than Northern Rock.

Before concerns arose about the impact of bad debts, rising mortgage costs and contamination from the collapse of the US sub-prime mortgage market, British banks usually had about 3% of their stock on loan.

So far, the bets have paid off. The Lansdowne Partners UK Equity fund, run by Peter Davies and Stuart Roden, has reaped over £500m from taking short position in Northern Rock amounting to nearly 10% of the bank’s market value.

Meanwhile, the consortium led by Sir Richard Branson is stepping up its campaign to take over Northern Rock.

If Virgin Money is successful in buying Northern Rock it will offer very aggressive deposit rates to attract up to £20 billion in its first year of ownership. Analysts say this is crucial if it is going to become less reliant on wholesale money markets to refinance its mortgage book.

Virgin is also expected to meet some big-name banks this week which are considering providing the liquidity to fund up to £90 billion of the bank’s mortgage business. AIG has told Virgin it is prepared to use its own covenant to underwrite up to £5 billion of the bank’s securi-tised mortgage debt.

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