Credit crunch woes slash bank’s profits

Aug 2 2008 by Alex Turner, Liverpool Daily Post

ALLIANCE & Leicester Commercial Bank’s performance provided a rare highlight for the group which yesterday said the credit crunch turmoil had almost completely wiped out profits in the first six months of the year.

The commercial banking division, which employs nearly 2,000 people in Bootle, saw its core operating profits increase £11m to £89m.

However the bank, which has agreed a £1.26bn sale to Abbey’s Spanish banking parent, Santander, reported interim pre-tax profits of £2m, down from £290m.

The credit crunch was blamed for a hit of £209m, which was on top of £150m of writedowns announced last year.

In the six months to June, 17,200 new business banking current accounts were opened, 3% higher than in the same period in 2007, and the commercial bank now has more than 200,000 active accounts.

Bryce Glover, who was appointed managing director of commercial banking earlier this month, said: “Alliance & Leicester Commercial Bank continues to attract many thousands of new business customers who recognise great value and excellent service. Over the past few years, we have transformed it into a strong, full banking provider.”

Underlying core operating profits, with credit crunch writedowns and funding costs stripped out, rose 2% to £301m.

The group’s mortgage business has slowed dramatically as it seeks to tighten lending criteria in the face of market troubles.

David Bennett, group chief executive, said A&L was taking prudent action and proving resilient to the market woes, but warned the problems in the sector may not ease for some time.

“There is a risk that the current economic and market turbulence could continue for a significant period of time and a risk of further uncertainty,” he said.

alex.turner