A&L secures funding to get through '08

UK bank Alliance & Leicester (A&L) said it had secured funding to see it through this year but warned that profits would plunge after it trebled the impact of its losses on complex financial instruments.

A&L said its writedown on holdings of structured investment vehicles (SIVs) and other products swelled to 185 million pounds from an estimated 55 million pounds in November.

The bank said that excluding the writedown its 2007 operating profit would have beaten a consensus forecast of 598 million pounds but, with the hit, profits were likely to be little more than 413 million pounds, down 29 percent from 585 million in 2006.

But A&L, Britain's seventh-largest listed bank, said it had pre-funded its maturing medium-term needs to the end of this year, up from its previous estimate of the third quarter, providing some support to its shares, which by 0845 GMT were down 0.6 percent at 721 pence.

"In summary, this is clearly not good news, and a sign of what we could expect from the other UK banks as we go into earnings season," said Ashley Stuart, an analyst at JP Morgan, hinting at how other banks could suffer further writedowns.

A&L shares fell by as much as half last year, amid concerns the credit crunch had forced banks to restrict lending to one another, following losses on low quality US mortgages. It was this crunch that led Northern Rock to seek emergency help from the Bank of England.

A&L calmed fears, in November, by saying it had agreed a 4-billion-pound, two-year financing facility with Credit Suisse. Tuesday's update said 145 million pounds of write-down emanated from impairments on its asset SIVs.

Agencies

(China Daily 01/30/2008 page16)