A&L secures £4 billion Credit Suisse loan

by Gill Montia

Story link: A&L secures £4 billion Credit Suisse loan

Alliance & Leicester (A&L), the mortgage bank that this week warned that 2007 profits would be below market expectations, has borrowed £4 billion from Credit Suisse.

The bank’s chief executive, David Bennett, reported that the loan meant the bank was now fully funded “comfortably” into 2008.

In its unscheduled trading update yesterday, A&L announced that it would take a £55 million pretax loss on its exposure to credit markets.

Analysts at Citigroup have described the losses as significant and are also questioning the terms of the Credit Suisse loan.

The two years arrangement pays a commercial interest rate above Libor (the rate that London-based banks charge to lend to each other) and is secured on a portfolio of the bank’s prime mortgages.

However, money market experts are impressed by the two-year term of the loan, as in recent times banks have been unwilling to lend to one another in the longer-term.

Yesterday, shares in A&L increased by as much as 15%, despite a warning that the bank’s operating profits for the full year would come in below analysts expectations of £589 million.

In addition to the news of the loan, A&L shares were boosted by speculation that Banco Santander, the Spanish bank, is considering a bid approach.