Shares in Bradford & Bingley (B&B) closed at a record low yesterday as the bank was downgraded two notches to one level above junk status. News that the embattled buy-to-let mortgage lender had extricated itself from having to buy £1 billion of unwanted mortgage assets next year came after the market closed, too late to prevent the shares sliding 12 per cent to 24p.

Fitch Ratings downgraded the bank from BBB+ to BBB-, the lowest of ten investment-grade rankings. Any further downgrade would class it “speculative grade”, or junk - an unflattering label for a deposit-taking institution. Standard & Poor's also downgraded B&B's short-term counterparty rating from A-2 to A-3. Constraints on the bank had increased materially in recent days, it said.

Fitch said that it was concerned by reports that the Financial Services Authority was seeking a rescue bidder for B&B. The uncertainty could damage confidence and lead to savers withdrawing money, as they did over the summer when its attempts to raise fresh capital were derailed repeatedly.

An old contract obliging B&B to buy a further £1.75 billion of mortgages from GMAC-RFC by the end of next year has damaged sentiment because past mortgages bought from that provider have soured markedly. B&B said that it had renegotiated the deal so that it would buy only between £725 million and £750 million by next March. However, it will still pay GMAC a £12 million to £13 million premium that it would have paid had the original contract stood.

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