Alliance & Leicester's profits have fallen to less than a tenth of their level a year ago it was revealed today.
The bank says its core retail and commercial banking operations are robust, but has suffered from losses on treasury investments.
Core profits, including losses from treasury assets and other costs, were just £22m in the first of 2008, down 92% from £295m last year.
Furthermore, stautory profits before tax fell 99%, from £290m in the first half of last year to just £2m over the past six months.
Retail banking operations made a core operating profit of £211m, up £4m from last year, while commercial banking operating profits hit £89m, up 14%. However, A&L’s treasury operation made a loss of £272m. Dividend payments will be 18p per share.
The bank has scaled back its mortgage operations to cope with the housing market downturn, with gross lending falling from £3.8bn to £2.4bn, while outstanding balances have been reduced from £42.7bn to £40.6bn.
Mortgage arrears have increased, up from 0.49% at the end of December 2007 to 0.61% at the end of June. A&L says this is still much lower than the Council of Mortgage Lender’s average.
Today’s news cause A&L’s share price to fall 1.6% to 335p per share, but it is unknown whether this will affect Santander’s offer for the bank, which will be considered by shareholders in October.
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