Alliance & Leicester reports £1.3 billion loss
Alliance & Leicester, which was last year rescued by the parent company of the Abbey group, Santander, has today revealed losses of £1.3 billion for 2008. This compares to a profit of £399 million in 2007 although the last 12 months have seen a substantial reduction in the quality and security of the company's loan book. Prior to the economic crisis in UK, 0.7% of the company's loan book had gone "bad" although this has now risen to a worrying 1.7% and could move higher before it starts to fall.
The company is one of a few mortgage lenders in the UK which were recently criticised for offering 125% mortgages, along with the likes of Northern Rock. Once the darling of the mortgage market, Alliance & Leicester was rescued last year by Santander in what is becoming a very expensive deal for the company. We are seeing more and more examples of how the smaller more highly geared operators in the mortgage market have suffered over the last 18 months with the likes of Bradford & Bingley, Northern Rock and Alliance & Leicester finding the going very tough.
Old stalwarts of the UK mortgage sector such as Lloyds Bank, Barclays and HSBC initially showed signs of strength when the economic downturn came but have since succumbed to the pressure and are struggling as well.
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