Subprime losses worse than expected for A&L but funding secure

29-01-2008

Subprime losses worse than expected for A&L but funding secure
UK bank Alliance & Leicester (A&L) has said it will be writing down £185 million in losses to subprime-related investments.

Today's unscheduled announcement by the bank reflects the nervous state of many financial businesses in the wake of the subprime meltdown in the US.

Excluding the loss, the bank said that underlying core operating profit of £598 million for 2007 would still be an improvement on last year's £585 million.

"Our customer-facing retail and commercial bank businesses continue to perform well," said the group's finance director, Chris Rhodes.

"Financial market conditions have resulted in losses on certain Treasury investments, reducing 2007 core operating profit to lower than in 2006."

The result is all too familiar for many banks rattled by the subprime mortgage debacle in the US and ensuing credit crunch.

The commercial bank said that the exposure of its credit products had increased due to worsening market conditions through the end of 2007, but that it had secure sources of funding into 2008.

A&L had previously forecast losses to be in the £55 million range before increasing that figure to £185 million today.

Shares in A&L have dropped by just over a percentage point to 717.50p in early trading today on word of the loss after opening up at 730p.

The group also said that chief executive David Bennett was on temporary leave due to illness, with Mr Rhodes filling the absence.

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