A&L reveals sub-prime exposure

by Gill Montia

Story link: A&L reveals sub-prime exposure

Alliance & Leicester’s (A&L) recent report on its £18.9 billion treasury portfolio has highlighted concerns over the exposure of UK banks to the US sub-prime mortgage crisis.

A&L, which is the UK’s sixth-largest mortgage lender, has invested approximately £390 million in a variety of structured investment vehicles (SIVs).

The bank has stated that only a small proportion of its SIVs are exposed to potential losses as a result of the difficulties in the US.

However, some analysts have been surprised by the extent of A&L’s investments in SIVs.

The bank has also revealed that it has been operating a conduit facility, totalling around £770 million and invested in a variety of structured credit assets, which include collateralised debt obligations and collateralised loan obligations.

It is reported that A&L believes its maximum potential loss in the US sub-prime mortgage market lies between £85 million and £90 million.

The bank has put forward reassurances that its current position and the liquidity issues on the money markets have had no effect on profits or growth.

At the same time, some analysts are questioning the actions of A&L’s treasury division, given that it is essentially a mortgage bank.

A&L’s statement is the most comprehensive made by any British bank so far in relation to the US sub-prime mortgage crisis and it comes as interest in the exposure of UK banks is intensifying.