After announcing a u-turn on its decision to issue to undertake a rights issue last month, Bradford & Bingley has now announced that “difficult economic conditions” have led it to take “a more cautious outlook for the year”. According to a statement from the bank, a decline in net interest margin and increasing arrears have meant underlying profits for the first four months of 2008 amounted to £56m, compared to £108m in 2007.

The mortgage lender also announced private investment firm TPG Capital has agreed to invest approximately £179m in the bank – a 23% stake. The rights issue announced last month has also been restructured, with shares now being issued at 55 pence, reduced from 82 pence. Combined with the TPG stake, the amount raised will now be £400m, with the restructured rights issue raising approximately £258m, rather than £300m as previously announced.

Finally, the statement revealed that Steven Cranshaw has stepped down as group chief executive with immediate effect, due to serious illness. Chairman Rod Kent has become executive chairman and will run the business on a temporary basis.

Kent said: “The last few weeks have been challenging for Bradford & Bingley, and this is a disappointing trading update reflecting a more difficult market environment. I understand shareholders’ disappointment. Nevertheless, I am delighted to welcome TPG as a major strategic investor in Bradford & Bingley. With a strengthened capital base and the skills that TPG will bring I am sure we can develop the business to exploit the opportunities available in our markets in the medium term.”