Alliance & Leicester plans to reduce mortgage lending this year after it reported a 30 per cent slide in 2007 pre-tax profits in the wake of £185m of write-downs on its Treasury assets. Financial Times, The Times
The lender said pre-tax profits had fallen from £569m in 2006 to £399m in 2007. Shares, which have halved in the past year, fell by 36p, or 6.82%, to 492p after concerns that A&L’s future profitability would be reduced because of the £150m increased cost of new liquidity facilities that it has been forced to put in place.
The new facilities mean A&L will be able to fund itself until early 2009 but this will hit profitability. A&L’s net interest margin - a key profitability measure - will decline to 1% in 2008 from 1.16% last year, and several analysts have reduced their profit forecasts for 2008.