A&L 'strong' despite new £192m credit crunch hit

Mortgage bank Alliance & Leicester took another £192 million hit from the credit crunch in the first four months of this year but said it had yet to see any real signs of distress among its borrowers.

Chief executive David Bennett, who recently returned to work after a lengthy illness, said core operating profits were similar to those in 2007 if one excluded the credit-crunch hit.

He added that the bank's funding position remained strong with medium-term funds secured through to the second quarter of 2009. Analysts took that to mean the bank does not need a rights issue.

As well as the £192 million direct hit on its profit-and-loss account, A&L's funding costs were £49 million higher in the four months because of the credit crunch. A&L lost market share among the lenders in the period as it tightened its lending policy.

It no longer offers mortgage to anyone with less than a 10% deposit, and charges higher interest for those who cannot provide 25%.

Bennett said borrowers who are more than three months behind with payments had risen by just 300 to 2650 out of 462,000 mortgage accounts. That is 0.57% of accounts in arrears compared with an industry average of 1.34%.

A&L expects its operating expenses to be lower in the first half of this year than last. It said its net interest-rate margin for the year is on track to average 1%.