A&L shies away from mortgages

by Gill Montia

Story link: A&L shies away from mortgages

Alliance & Leicester (A&L), which yesterday reported a 30% drop in 2007 profit, has warned that it will be turning away from the mortgage market in 2008.

The UK’s seventh-largest bank also said that it will not be competing strongly for savings business, leaving analysts wondering exactly what it will be doing in the coming months.

Last year, A&L was forced to write down £185 million in sub-prime related investments.

Today’s record low share prices mean that speculation about a takeover of the bank is mounting.

A&L’s chief executive is currently on sick leave but its finance director, Chris Rhodes, has reported that the bank will spend an extra £150 million on wholesale borrowing this year and would see its margins cut as a result.

In 2007 deposits funded 56% of the bank’s lending and its reliance on wholesale funding will make it less competitive than some rival lenders.

The bank has secure funding through to the first quarter of 2009, but according to Mr Rhodes it has “come at a cost”.

A&L is pinning its hopes for business growth on winning new current account customers; the bank secured 4.3% of new account openings last year.