A&L shares tumble as Agricole pulls out of bidding

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The Independent Online

Alliance & Leicester shares fell 65p to 1,084p yesterday - the steepest loss by any constituent of the FTSE 100 - after Crédit Agricole revealed it was no longer looking into a £6bn bid.

France's biggest bank, led by its chief executive, Georges Pauget, failed to uncover sufficient benefits from a tie-up to press ahead.

That is understood to have been, in part, a result of the upward march of A&L's shares in recent months that has been underpinned by hopes of a bid.

In March, informal soundings about a possible 1,300p-a-share cross-Channel offer were batted away by A&L's chief executive, Richard Pym. He thought that too mean, and is understood to value the mortgage and savings bank's shares at about 1,500p.

Two months later, Crédit Agricole confirmed publicly that it was interested.

Any takeover now looks unlikely in the short term. The other lender most often linked with A&L - Banco Santander, the Spanish owner of Abbey - has made it known to major shareholders that it is not interested in another British mortgage bank. Instead, Santander is on the lookout for other types of financial assets in the UK to build a high street bank to take on the likes of Barclays and Royal Bank of Scotland.

Santander's chairman, Emilio Botin, is an opportunistic buyer and there are those within the City who still expect him to make a move on A&L, long seen as vulnerable to a bid, if the price is right.

James Invine, the UK banks analyst at Merrill Lynch, thinks that when stripped of bid premium A&L shares are worth just 870p each.

Meanwhile, Crédit Agricole, established 12 years ago to provide finance to French farmers, has said it wants to assume full control of the Greek lender Emporiki. It already holds a 9 per cent stake.

A&L welcomed the clarification from Paris, and said it was business as usual.

In June, A&L revealed it had won almost double its traditional 3.4 per cent share of new lending in the first three months of the year. It had made a further improvement on the 5.4 per cent achieved last year.

However, last year's growth was at the expense of margin - the difference between the rate at which it borrows and lends funds.

Industry experts say A&L is showing clear signs of improvement in areas such as new mortgages and current accounts and relationships with independent financial advisers who sell its products. Last month, A&L said it would move into the buy-to-let market, backed by the US investment bank Lehman Brothers.

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