A&L posts 30% profit decrease

by Gill Montia

Story link: A&L posts 30% profit decrease

Alliance & Leicester (A&L) has recorded a 30% decrease in profit for 2007, following writedowns totalling £185 million in relation to sub-prime investments.

Pre-tax profit at the UK’s seventh-largest bank fell to £399 million, from £569 million in 2006; A&L’s writedown was over three times higher than the estimate of £55 million given towards the end of last year.

The bank has confirmed that it has obtained wholesale funding to cover its business into the first-quarter of 2009. However, margins will be adversely affected by the higher cost of borrowing.

Last year deposits increased by £1.2 billion, to £30.8 billion. Of the loans sold last year, customer deposits funded 56% and the bank expects this proportion to increase in 2008.

A&L saw a 1.5% rise in its retail banking core operating profit to £462 million. Mortgage book arrears were down to 0.49%, from 0.51% in 2006. (The industry average in arrears is 1.2%.)

Chris Rhodes, A&L finance director, has described the trading outlook for financial services as “challenging” in 2008.