Bradford & Bingley proved this week that bad news does come in threes.

The former building society stunned the City on Monday with a profits warning that sent the share price tumbling. And what a warning it was: an £8 million loss in the first four months of the year, against a £107 million profit in the same period last year. This was accompanied by a grim trading update. The bank, Britain's biggest buy-to-let mortgage lender, said that bad debts had jumped by 38 per cent between the start of the year and the end of April. To cap it all, Steven Crawshaw, the chief executive of six years, resigned, citing a serious heart problem.

After such a calamitous week it is tempting to assume that things can't get worse for the bank's investors, many of whom have held the shares since demutualisation in 2000.

Compared with this time last year - or even last week - B&B's shares look cheap. On Monday they fell by a quarter, taking the slump since the 536p high of March 2006 to nearly 90 per cent. They trade at the equivalent of only two times earnings per share, compared with nine times for the banking sector and 12 for the FTSE 100 index. They are also at a big discount to book value - the accounting value of its assets.

However, TPG, the US private equity group, appears to see value and brighter prospects ahead. At least one assumes that's why it picked up a 23 per cent stake in the former mutual for the bargain basement price of £179 million this week.

But the chances of recovery in a form that will give shareholders value any time soon looks a remote prospect. As one stockbroker reminded me this week, investors must understand that the point to buy is not when everything is at its worst, it is when you can see that things may be about to get better. We are a long way from that point yet.

B&B's board is facing a crisis of confidence. Rod Kent, the chairman who has stepped into the chief executive's role, reassured shareholders that B&B has a strong balance sheet. The problem is that, after a series of U-turns and blunders, investors no longer know whether they can believe what he or any other directors say.

On April 14 the board denied vehemently that it was planning a rights issue, only to announce one only a month later.

At the time there was no mention of a profits warning, because the directors have been basing decisions on hopelessly out-of-date accounts. Antiquated computing systems mean that the directors appear not to have realised how bad things were getting until figures landed on their desks at the end of May. Cue another embarrasing about-turn as the rights issue was repriced at 55p, down from 82p.

This is hardly encouraging, nor is the knowledge that B&B's troubles have arisen at the beginning of what is expected to be a drawn out downturn in the housing market. If we even skirt with recession, or unemployment rises markedly, things could get very nasty. At the very least, investors should brace themselves for bad debts to rise for quite some time.

So forget how cheap it looks. TPG may see value in B&B's shares, but it has both the time and the money to take huge risks.

If you, like TPG, are prepared to wait for three to five years, the market will almost certainly have improved and B&B's fortunes with it. Investors who have the stomach to sit things out may as well take up the offer to buy new shares in the rights issue. Otherwise I would head for the exit as soon as possible. Sure, it would have been better if you sold this time last week, but all the indications suggest that there is worse to come. Sell.

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