Alliance & Leicester problems

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Alliance & Leicester Profit Drops 67% on Writedowns (Update1)

By Poppy Trowbridge and Jon Menon
Feb. 20 (Bloomberg) – Alliance & Leicester Plc, the second
worst performing U.K. bank in the past month, said profit
declined 67 percent in the second half as funding costs rose and
it lost money on leveraged loans.
Profit fell to 73.1 million pounds ($142 million), or 17.4
pence a share, for the six months to Dec. 31, from 221.5 million
pounds, or 49.6 pence a year earlier, the bank said today in a
statement. Bad debt provisions for the year were 100.2 million
pounds, compared with 104.8 million pounds a year earlier.
The Leicester, England-based mortgage lender borrows funds
from the capital markets and now faces rising costs and
declining valuations on asset-backed securities as investors
quit the market in the wake of the U.S. subprime crisis. The
U.K. government decided this week to nationalize Northern Rock
Plc after a bailout by the Bank of England.
In the light of unprecedented conditions in the financial markets since August 2007,'' Alliance & Leicester said its previous target for annual earnings per share growth through 2009 of 9 percent above inflation is no longer appropriate,‘’
Alliance & Leicester said in the statement.
Bradford & Bingley Plc, the worst performing bank stock in
the past month, raised concerns about financial industry
writedowns and bad loans after it reported an unexpected loss
last week. Assets sales and markdowns cut its full-year net
income by 225.6 million pounds. Bad loans more than tripled.
Alliance & Leicester has fallen 18 percent this year in
London trading, trimming its market value to 2.2 billion pounds.
Banco Santander SA Chairman Emilio Botin ruled out a takeover
offer for the bank on Feb. 7.

A&L shares down 19% this morning.

1. BN 8:05 *ALLIANCE & LEICESTER SHARES FALL AS MUCH AS 19% :AL/ LN
2. BN 7:15 *ALLIANCE & LEICESTER SAYS EPS TARGET `NO LONGER APPROPRIATE’

[Mark]

Methinks the UK could have a few more nationalised lenders before this crisis is over.

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10:50 *ALLIANCE & LEICESTER OUTLOOK NEGATIVE BY MOODY’S :AL/ LN
10:50 *ALLIANCE & LEICESTER OUTLOOK NEGATIVE BY MOODY’S :AL/ LN
10:50 *ALLIANCE & LEICESTER S-T RATINGS AFFIRMED BY MOODY’S :AL/ LN
10:50 *ALLIANCE & LEICESTER L-T DEPOSIT, DEBT FROM Aa3 BY MOODY’S
10:49 *ALLIANCE & LEICESTER L-T DEPOSIT, DEBT RATINGS TO A1 BY MOODY’S
10:49 *ALLIANCE & LEICESTER BFSR CUT TO C+ FROM B- BY MOODY’S :AL/ LN
10:49 *ALLIANCE & LEICESTER OUTLOOK NEGATIVE BY MOODY’S :AL/ LN
10:49 *MOODY’S DOWNGRADES ALLIANCE & LEICESTER TO A1/C+ :AL/ LN

London, 16 April 2008 – Moody’s Investors Service has today downgraded
the ratings of Alliance & Leicester plc (Alliance & Leicester.) The bank
financial strength rating (BFSR) was downgraded to C+ from B-, and the
long-term bank deposit and debt ratings were downgraded to A1 from Aa3.
The C+ BFSR maps to a baseline credit assessment of A2. The P-1
short-term debt and deposit rating was affirmed. The outlook is now
negative. This concludes the review for possible downgrade initiated in
December 2007.

Moody’s said that the downgrade reflected the impact on the bank’s
profitability of increased funding costs as well as the impact on the
bank’s financial fundamentals of the impairment charge and declines in
the fair value of certain treasury investments in 2007, and Moody’s
expectation for further negative adjustments in 2008.
…

Moody’s believes that the probability of systemic support for Alliance &
Leicester plc is moderate, which results in a one-notch uplift in the
Global Local Currency deposit rating to A1 from the A2 baseline credit
assessment.