Alliance & Leicester in £391m write-down

Alliance & Leicester (A&L), has announced it will write-down £391 million on treasury investments as well as on its exposures to structured investment vehicles and collateralised debt obligations, of £192 million.

Furthermore, treasury investment fair-values declined £199 million in the first 4 months, against a fall of £147 million in the same period last year. This fair-value impact is taken against reserves and will not affect the profit-and-loss account.

Profits for the first four months of 2008, not including its Treasury division, are broadly in line compared with the same period 12 months ago.

David Bennett, group chief executive of the bank, said core operating profit excluding Treasury was similar to the same period in 2007, although volatility in the financial markets has led to a further reduction in the value of certain treasury assets.

Following the news, shares in Britain’s seventh largest bank lost over 11% in value mid-morning yesterday - an 8-year low.

Shares in the bank have been under pressure recently as investors were concerned that it could be one of the banks needing a rights issue to improve its balance sheet. Recently, there has been speculation that the bank could be vulnerable to a bid.

Earlier in the year, Spanish bank Santander was rumoured to interested in A&L but talks broke down on the final price Santander was prepared to offer.

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