Britain's high street banks have agreed to buy a large chunk of shares to rescue troubled Bradford & Bingley, it has been reported.

The buy-to-let lender's share price dropped to 34p on Tuesday, down from a high of 539p in March 2006, prompting fears the stock is now worthless.

The bank wanted to raise £400 million in a rights issue, selling shares to shareholders at 55p. But the heavy losses may leave the underwriters forced to buy the shares.

The Daily Mail reports that the six high street banks, HBOS, Abbey, Barclays, Lloyds TSB, Royal Bank of Scotland and HSBC, stepped in after being leaned on by the Financial Services Authority.

They have promised to buy the shares which Bradford & Bingley's main underwriters, the American investment banks UBS and Citigroup, do not buy, a procedure known as "sub-underwriting". The "Big Six" banks could end up owning at least 30% of their rival.

Analysts do not believe the bank is heading for a Northern Rock-style crisis. Savers would in any event have the first £35,000 of deposits protected by the Government.

B&B has been hit hard by the mortgage troubles caused by the credit crunch and the subsequent housing market woes.

It has reported mounting arrears within its buy-to-let borrowing base as many property owners struggle with repayments.

One City firm has cut its target price for the bank to "zero" in the wake of its credit rating downgrade last week by Moody's and the decision of private equity firm TPG to withdraw its £179 million investment.

A spokesman for Lloyds TSB said: "We were one of the sub-underwriters for the original deal, that remains the case as part of the restructured deal."

A spokeswoman for the Financial Services Authority said: "This story (in the Daily Mail) is untrue. The FSA had no discussions of that nature yesterday.

"The fact is that many of our leading banks are sub-underwriters to the Bradford & Bingley rights issue, as has been widely reported elsewhere."

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