A&L credit crisis estimates on the rise

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The Independent Online

Alliance & Leicester has more than tripled its estimates of its exposure to the global credit crisis, warning that its holdings in asset-backed paper would require a charge against profits of £185m for 2007.

The mortgage bank said in October that it expected credit-crisis-related write-downs of £55m for its 2007 financial year. Yesterday, however, it said there had since been a serious decline in the value of the structured investment vehicles (SIVs) in which it has holdings, and that its asset-backed securities and collateralised debt obligations (CDOs) had also been hit.

As a result, the bank had increased its fair value and impairment charges for last year to a total of £185m.

The higher write-downs follow the launch of a review of A&L's status by Moody's last month. The credit ratings agency, which has yet to complete the investigation, said it was concerned there would be further charges on A&L's treasury portfolio.

Nevertheless, A&L, which has been at the centre of takeover speculation for several months, especially since talks with Spain's Banco Santander broke down in December, said it was continuing to "perform well".

It expects to report profits for last year, excluding impairment charges, of more than the consensus figure of £598m, and has also secured funding for its lending book until the end of 2008. Customer deposits now fund 56 per cent of its loans.

The bank also announced yesterday that David Bennett, the chief executive appointed last summer, is to take a temporary leave of absence from the post while he fights a serious abdominal illness. While Mr Bennett is expected to make a full recovery, the illness will keep him off work for some time. Chris Rhodes, A&L's finance director, will stand in for Mr Bennett while he is ill.

Shares in the mortgage bank fell sharply yesterday, closing at 700p, 3.45 per cent down from 725p previously.

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