A&L shares slide on news of £391m write down

by Gill Montia

Story link: A&L shares slide on news of £391m write down

Alliance & Leicester (A&L) shares fell over 10% (to 458¾p) yesterday on the news that the bank is writing down £391 million in credit crunch related debt.

The slide followed predictions that the bank’s first-half profit could effectively be wiped out as a result; figures for the first four months of the year are already below 2007 levels.

Analysts are now forecasting that shareholders could see their dividend cut by 30% this year, in an effort to shore up the bank’s capital position.

Last year, A&L paid a dividend of 55.3p and shareholders had expected that to be maintained in 2008, following an announcement in February indicating that this was possible.

The bank has over half a million shareholders and has raised its dividend every year, since it demutualised in 1997.

The lender maintains that its mortgage book is sound, with only 2,650 out of its 462,270 mortgage borrowers more than three months in arrears with their payments.

However, along with some of its competitors, the bank is not keen to attract new business and its mortgage balances fell by £1.5 billion, to £41.2 billion, in the first four months of the year.

A&L is heavily reliant on the wholesale money markets for its funding and has not ruled out the possibility of a rights issue, although it says its capital to risk ratio is strong.