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Alliance and Leicester Register Meagre Profits

01-August-2008, Writes Dan Drage dan.drage@consumerchoices.co.uk

Alliance and Leicester became the latest bank to be hammered by the credit crunch, suffering a 99% drop in half year profits.

From January to June, Britain’s seventh biggest bank saw profits nosedive from £290m to just £2m, a 99% decrease across six months. £209m of the £288m deficit constitutes write-offs against risky assets and increased funding costs.

Last month, Alliance and Leicester (www.alliance-leicester.co.uk) accepted a £1.26bn takeover bid from Spanish banking group Santander, in a deal that was perceived by industry insiders to be something of a steal. Two years ago, Credit Agricole of France considered paying almost £6bn for Alliance and Leicester.

Alliance and Leicester’s profit haemorrhage comes at the end of a bleak seven days for UK banks. Lloyds TSB (www.lloydstsb.com) and Halifax (www.halifax.com) owner HBOS revealed profits slumped by around 70% as the crisis in financial markets wreaks havoc on the high street.

Barclays (www.barclays.com) and the Royal Bank of Scotland (www.rbs.co.uk)are yet to report.

Alliance and Leicester Chief Executive David Bennett had the following to say:

“Alliance & Leicester's underlying business is in good shape, but our financial results have been significantly affected by treasury losses in the first four months of the year and by high funding costs”

He continues:

“The proposal from Santander provides greater stability and greater certainty in uncertain times”

Chris Eagle, Commercial Manager at Credit Choices, isn’t surprised by this profits slump:

“What was anticipated to be a tough year for banks has played out as forecast. I hope I’m wrong, but there’s likely to be a nasty sting in the tail for account holders and bank customers when banks start trying to claw these lost profits back.”

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